This morn, all eyes are on the takeover proposal, in a letter from Steve Ballmer to Yahoo’s Board of Directors, stating an offer of $31 in cash or 0.9509 of a share of Microsoft common stock per share for Yahoo (YHOO). The total deal valued at $44.6 billion — a huge 62% premium to Yahoo’s closing price of $19.18.
The most interesting part of this is that Mister Softee seems to have waited until Google had its first bad earnings report — missing the earnings consensus by 2 cents, and perhaps looking in their eyes, vulnerable. Perhaps it was coincidence, but the timing looks fortuitous.
A few questions immediately pop up:
Why is Ballmer & Co. paying such a big premium? Does this imply the entire Tech market is hugely undervalued — or is Microsoft (MSFT) desperate to catch up with Google (GOOG)?
And since Mister Softee was so desperate to stop the Google/DoubleClick deal on Anti-Trust grounds, it makes me wonder if there will be any legal issues between a marraige of Yahoo and Microsoft. Obviously not for search — their combined market share is still tiny compared to Google. But consider what these two companies are: the biggest software maker now wants to get together with the biggest web portal. That could certainly raise some valid anti-trust issues.
What is not known yet is how the two different search technologies — Yahoo’s Panama, and Microsoft’s — will integrate.
I’ll go even a step further: Mister Softee’s biggest cash cows –
Windows and Office — look shakier than they ever have. There are real
competitors for PCs (Apple, Linux) and lots of free or nearly free
office software (Open Office, Google Apps). I assume Microsoft is
projecting out current trends 5 and 10 years; they might truly believe
that if they can’t compete in the online search/advertising space, they
are in trouble.
Here’s the ironic part: The 2 most visible losers in the search area
may be getting together — and somehow, that’s worth 150 point swing to the Dow futures.
I guess the negativity isn’t quite as excessive as some people claim!
Some recent, related headlines:
• Yahoo Says Former Chief Semel Steps Down as Chairman (Bloomberg, 1/31)
• Google posts 17% profit gain, but shares slide lower (Marketwatch, 1/31)
• and the WTF headline: Google’s Loss Is Murdoch’s Gain (NYT’s Bits)
Microsoft Letter to Yahoo!
PRNewswire-FirstCall, February 01, 2008: 06:30 AM EST
Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.