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Microsoft Withdraws Yahoo Takeover Offer

Posted by timothy on from the brinksmanship-in-the-pac-no-west dept.

mksmac writes "According to the KOMO TV Website, Microsoft has withdrawn its bid for Yahoo after presenting them with an increased offer that was subsequently declined by Yahoo. Frankly, this seems like a smarter decision on Microsoft's part, but I'd like to hear how other people feel about the deal. Should Microsoft have walked away, pressured Yahoo via a hostile takeover or sweetened the pot until Yahoo gave in?" For those who prefer it, the NYT also has coverage, and the story is also at news.com, among many others. I like the Beeb's version as well. And for the Microsoft-centric explanation of why the courtship is over, see Steve Balmer's letter to Jerry Yang.

12 of 336 comments (clear)

  1. My question is... by kithrup · · Score: 5, Interesting

    This doesn't seem to have been a particularly well-handled, or deeply-sincere, attempt by Microsoft... so what were they really doing?

    This is a sincere question; I've seen a lot of acquisitions (and even hostile takeovers) happen, and this seemed lacking in many ways. Maybe I've missed some of the machinations; maybe not.

    1. Re:My question is... by Anonymous Coward · · Score: 5, Interesting

      Microsoft is in the process of buying back stock with their oh so massive capital. They just got to spend months doing this with a defalted stock price because of the buyout offer. Now that the offer is off the table, the stock price should start to go back up.

    2. Re:My question is... by CodeBuster · · Score: 5, Interesting

      It wasn't just the Yahoo executives who weren't interested in the deal. There was no way that Microsoft could win a proxy fight for Yahoo at anything approaching a reasonable price. The founders and various other individuals (including the board) owned about 34% or so of the outstanding shares and there was at least 25% more owned by individual investors (who rarely bother to vote in proxy fights which means that the board would get to vote those shares too). So the board and the individuals opposing Microsoft controlled at least 60% or so of the outstanding shares, making any hostile takeover direct shareholder tender offer a non-starter (unless Microsoft offered an insane price which they obviously weren't going to do). Microsoft did the only thing that they could do, they made the prudent decision and walked away.

    3. Re:My question is... by 99BottlesOfBeerInMyF · · Score: 4, Interesting

      From appearances Yahoo seems to be a terrible acquisition target; it is large and healthy enough to be very expensive and burdensome, but not growing rapidly or successful enough to be a major asset to someone like Microsoft.

      Yahoo combined with MS's own Web and internet services would have been enough to give MS majority market share in several new markets. More importantly, many of yahoo's services are pretty decent and doing quite well. For some other company they might not be a good acquisition, but for a company like MS that has several monopolies and is not at all shy about illegally leveraging them, Yahoo makes a lot of sense. When you have 25% market share, breaking compatibility with everyone else hurts you more than them. When you have 52% and it is growing because it is tied to Windows and MS Office and IE, breaking compatability with everyone else hurts them more.

      One theory I've heard floated is that they didn't actually want Yahoo, but by making a show of trying to acquire it hoped to bait Google into buying Yahoo on the basis of denying it to Microsoft, with the net result of burning a chunk of Google's resources and bogging them down with the process of absorbing something that large.

      It sounds unlikely to me. If that was their plan, it probably backfired. All it seems to have done is to get Google and Yahoo talking and making technology partnerships.

    4. Re:My question is... by hairyfeet · · Score: 5, Interesting

      Actually I believe that MSFT wanted yahoo because Yahoo mail is the number one web mail,followed by Windows Live mail. That combination would not only give them a big chunk of the web mail but tons of new data to mine. I am personally glad they quit as I would have hated to see my Yahoo mail end up some nasty Hotmail copy. But that is my take on it,YMMV.

      --
      ACs don't waste your time replying, your posts are never seen by me.
    5. Re:My question is... by smittyoneeach · · Score: 4, Interesting

      cheaper to just run vista
      No, cheaper is to keep an XP partition around for those godawful proprietary formats and websites that require IE and smart-card readers for which no liberated alternative exists.
      The other 90% of the time, run something that doesn't draw vacuum.

      cheaper to just run vista
      ...is like saying it's cheaper to keep smoking cigarettes than go through withdrawal. After all, in the long run, we're all dead, no?

      cheaper to just run vista
      I won't lie--when there is printing to do, Redmond products are amply suited to the task.
      Of course, in a greener world, we're printing less, but let's face it: quality printing (booklets and stuff) is not exactly a strong suit of Free Software. Which is kind of ironic, as text handling was one of the strong suits of the early Unix.
      --
      Get thee glass eyes, and, like a scurvy politician, seem to see things thou dost not.--King Lear
    6. Re:My question is... by NMerriam · · Score: 4, Interesting

      I wasn't even talking about Android, since it doesn't really exist yet in terms of the market (though certainly MS is keeping an eye on it). Google and Apple have been fairly chummy for a couple of years now -- look closely and you'll notice that the iPhone ships with only Apple and Google apps, nobody else was even invited to the party. Google has shown itself willing to make custom versions of their stuff for Apple, and Apple has shown it is more than happy to let Google handle providing complex and fundamental services rather than reinvent the wheel themselves. Apple has also done little things like add support for Google Talk to iChat, and it's worth noting that Safari is the only major web browser on any platform that *only* has one search engine built-in. When the Google CEO joined Apple's board, he basically said that Google specializes in running massive back ends and sorting through data, and Apple specializes in user-centric front ends and hardware, and they're a logical match.

      No doubt there's also a LOT of "the enemy of my enemy is my friend" going on at the strategic level.

      Since Google isn't profiting directly off Android, I don't think there's much direct competition between the companies in the mobile space. Google wants traffic to their servers, and is setting up Android as a free way for companies to build more network-enabled software even on the cheapest phones (a 'rising tide lifts all boats' effort towards the mobile space). Ultimately it doesn't much matter to Google if traffic to their servers is coming from an Android device or an iPhone device, so long as the traffic isn't going to MSYahoo. As long as Google stays out of the phone hardware business, I suspect Apple won't see them as a direct competitor, they'll just be another generic software platform provider while Apple provides an integrated hardware/software solution.

      --
      Recursive: Adj. See Recursive.
    7. Re:My question is... by lilfields · · Score: 4, Interesting

      Microsoft's business is actually doing quite well, have you looked at their profits lately? Their revenue stream? Microsoft needs Yahoo for internet advertising, because that part of their business has been a money pit. Just because you have a bias against Microsoft (obviously), doesn't mean that it's doing horrible. Also, Microsoft withdrew the bid in a formal letter, that does in fact mean they withdrew the offer; previously Yahoo had rejected it but I didn't see their stock tank...but now their stock is about to plummet.

      What the board and many here don't seem to understand is that Yahoo's stock is greatly overvalued even in the low 20s...it had a negative/flat growth rate with a forward looking price to earnings well above ~50...Google, which as a HUGE growth rate only has a forward looking price to earnings of ~32. Yahoo could sign a deal with Google and increase profits slightly, but they would have just wasted billions on their new advertising platform "Amazon", and their stock would still be overvalued. The fact that Yahoo didn't take that bid shows how poorly managed the company is. There are going to be a lot of shareholder lawsuits tomorrow morning as the stock drops 20-30%. At this point I wouldn't be surprised to see Microsoft just stepping in to buy shares and build a position to 5% stake, which is the legal limit before you have to file with the SEC and publicly disclose that you massive stake. At that point they would probably do a proxy battle and would win...getting Yahoo at an even cheaper price. Yahoo's management really is horrible, Ballmer (like him or not) is making a brilliant move. He tried to be generous with a massive premium, now he's just going to give them the traditional Microsoft shaft.

  2. MISSION ACCOMPLISHED! by Jeremiah+Cornelius · · Score: 4, Interesting

    Competitive Value of Yahoo! Demolished!

    Ballmer creates AOL Redux.

    --
    "Flyin' in just a sweet place,
    Never been known to fail..."
  3. Re:I'm torn by Anonymous Coward · · Score: 5, Interesting

    Well, as an employee, I saw it as a win-win, assuming I could find another job. Either Microsoft would turn over a new leaf and actually make the combo work well. Or it would be the death of Microsoft.

    And, unlike a lot of the folks there, I'm fairly confident that I'd be able to find a new job the second it became official.

    It's one of those dangerous ideas that you really need to be a nerd and know microsofties, googlers, and yahoos in order to understand exactly how stupid of an idea it really is.

  4. Savvy move by MillenneumMan · · Score: 5, Interesting

    Yahoo's market cap takes a hit, shareholders initiate lawsuits against the Yahoo board. Microsoft may be able to swoop in next quarter and accomplish this via hostile takeover for significantly less. Surprised Microsoft didn't do this sooner

  5. Re:I'm torn by Foofoobar · · Score: 4, Interesting

    Actually, I've been part of two Ziwbra installs at companies now and both were due to constant problews with Exchange. After switching to Zimbra, all users (mac, Linux and Windows) were able to interoperate smoothly and since the server was on Linux, we had no downtime. The stability in Zimbra and cross platform capabilities puts the original product to shame.

    --
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