Yahoo to Microsoft: No, Thank You

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"They tried to make me go to Redmond, I said, No! No! No!"

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The WSJ is reporting that the Yahoo Board of Directors plans to reject Microsoft unsolicited $44.6 billion offer:

"After a series of meetings over the past week, Yahoo’s board determined that the $31 per share offer "massively undervalues" Yahoo, the person said. It also doesn’t account for the risks Yahoo would be taking by entering into an agreement that might be overturned by regulators. The board plans to send a letter to Microsoft Monday, spelling out its position.

Yahoo’s board believes that Microsoft’s is trying to take advantage of the recent weakness in the company’s share price to "steal" the company. The decision to reject the offer signals that Yahoo’s board is digging in its heels for what could be a long takeover battle. The company is unlikely to consider any offer below $40 per share, the person said…

Yahoo has taken "poison pill" provisions to prevent an unwanted takeover. Microsoft would likely have to oust the board in order to overturn them."

And this isn’t even the news I was referring to yesterday . . .


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Source:
Yahoo Board to Reject Microsoft Bid
MATTHEW KARNITSCHNIG
WSJ, February 9, 2008 5:20 p.m.
http://online.wsj.com/article/SB120257515426256541.html

Category: Corporate Management, M&A, Valuation, Web/Tech

5 Historical Economic Crises and the U.S.

Earlier this week, I received a copy of a paper co-authored by Carmen Reinhart of the University of Maryland and Kenneth Rogoff of Harvard University, titled Is the 2007 U.S. Sub-Prime Financial Crisis So Different?.

Each of these authors have rather distinguished affiliations. Reinhart is with the NBER, the group whose Business Cycle Dating Committee officially marks the beginning and end of Recessions. And Rogoff is an adviser to the John McCain, who has (almost proudly) professed his economic ignorance.

Yesterday, in the NYT, Paul Krugman linked this paper to an interesting and perhaps unique factor regarding the 2008 presidential contest. None of the remaining 3 contenders — McCain, Obama or Clinton — are economic ideologues. No supply-siders in this group, no one from the Democratic old school.

If it turns out that the candidates are pragmatic centrists, more focused on problem solving than ideological belief system, it would be a good thing.

This is especially true, if the authors of the paper are correct. Why? If the present situation plays out as they expect, we are going to need all of the problem solving skills available. You see, Reinhart and Rogoff draw parallels between the current U.S. financial woes and five previous financial crises. All five of these were “associated with major declines in economic performance over an extended period:”

- Japan (1992)
- Spain (1977)
- Norway (1987)
- Finland (1991)
- Sweden (1991)

Of course, none of these are identical to the present 2008 USA, economically, culturally, or politically. However, when one takes a closer look, some of the major parallels are a cause for concern.

The Chronicle of Higher Education did just that. In reviewing the Reinhart
and Rogoff
paper, they focused on the parallels to the Japan crisis.

Like Japan et al., the United States has seen:

  • A steep rise in housing prices during the four years preceding the crisis. (The U.S. rise was more than twice as large as the average of the other five.)
  • A steep rise in equity prices. (Again, the U.S. rise was larger.)
  • A large increase in its current account deficit.
  • A decline in per-capita growth in gross domestic product. (In this case, the U.S. situation doesn’t appear as bad as in the five predecessors.)
  • An increase in public debt. (Here again, the U.S. situation isn’t as bad as in the historical examples – but Reinhart and Rogoff add that “if one were to incorporate the huge buildup in private U.S. debt into these measures, the comparisons would be notably less
    favorable.”)


The authors’ conclusion:

“Given the severity of most crisis indicators in the run-up to its 2007 financial crisis, the
United States should consider itself quite fortunate if its downturn ends up being a relatively short and mild one.”

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