Posts filed under “Valuation”
Last week, before the Microsoft (MSFT) deal was rejected by Yahoo’s Board, some interesting chatter was bouncing around NYC.
The latest rumor to make the rounds was that Yahoo (YHOO) was just about to announce a negotiated transaction for the sale of the company to an East Coast private equity firm. Then Microsoft stepped in the way. We first heard this story sometime between Mister Softee’s $31/share, $44 billion hostile bid, and this weekend’s rejection of that offer by Yahoo as an insufficient valuation for all of Yahoo’s properties.
The rumors of this now pre-empted private bid include the following:
-to be announced as early as February 5th;
-negotiated price was in the $23-25 range;
-some Yahoo! properties to be spun out to shareholders;
Note that Microsoft has been eyeing Yahoo for several years. The latest service pack of their unrequited ardor was back in May 2007.
While this remains unconfirmed by anyone willing to make an
on-the-record statement, it is well sourced enough that I suspect
there is sat least some degree of truth to it.
There have been other publicly available evidence lending some support to the rumors:
• CEO Terry Semel, long opposed any takeover, stepped down January 31.
• The apparent urgency to enact Jerry Yang’s 100 day plan seemed to have faded rather quickly. Putting this "Key turnaround plan" on the back burner could have been due to leaving major restructuring to the new owner.
• The suddenness of the Microsoft offer may have come about due to the PE bid. Mister Softee’s NY lawyers and bankers likely heard rumors, or even deduced, the likelihood of a private equity bid.
• Microsoft’s bid appears to have been calculated to preempt any further bidding or acquirers from becoming involved. With Yahoo’s stock closing under $20 on January 31, a bid with a premium of "just" 25 or even 30% might have left room for another bidder.
• Microsoft appears to have taken a "time-is-of-the-essence" approach. They obviously know that each and everyday, Google’s lead widens over both companies. From both a valuation and practical perspective, Microsoft made an offer that is all but impossible for another firm to top, and facilitates the most rapid acceptance by Yahoo.
With the Writers Strike now all but settled, we still are months away from fresh television content. Until that happens, we will just have to make do watching this technology soap opera play out . . .
One of the themes we have been hearing of late is that stocks, 10% off of their all time highs, are fully reflecting a recession.
That statement turns out to be, um, a tad less than accurate, as was shown by the most recent ISM non-manufacturing Index. Headlines such as Services Data Blindsides Market reveal how little the market actually had priced in even a mild recession, much less a deeper and longer one.
The ISM’s non-manufacturing
index reflects almost 90% of the economy, according to Bloomberg. Consensus expectations of 53% were dashed, as the index plummeted to ~41.0%. to the lowest level since October 2001. If we exclude 9/11, this was the weakest reading since the data began in 1997.
In response, all 10 industry groups in the S&P 500 declined, and the Dow dropped 220 points.
Across the board, the data released was surprisingly weak:
Business Activity Index at 41.9% (consistent with a recession historically)
New Orders Index at 43.5% (fell 10 pts)
Employment Index at 43.9% (An 8 point fall, matching the lowest on record).
Prices Paid remained elevated at 70.7
This is particularly surprising, as we recently learned from the WSJ OpEd pages that The U.S. Economy Is Fine (Really). I haven’t figured out why those pages insist on denying reality, but its their option to live in an alternative universe (Iraq has WMDs, economy is great, etc.)
There are lots of things that investors believe which I find perplexing. The Superbowl indicator is one, but the oddest to me is the so-called Fed Model, also known as the IBES Valuation Model. It is not that the Fed model is so terribly wrong — it has been both right and wrong over the…Read More