The last formal statements on Microsoft Corp.'s bid for Yahoo! Inc. were at the Microsoft shareholder meeting on Friday by CFO Chris Liddell:
Unfortunately, the transaction has been anything but speedy, and has been characterized by what would appear to be unrealistic expectations of value. Our initial offer was extremely generous, more than 100 percent premium of the Yahoo core business. Our view on value is shaped by the long-term value of the company, and we intend to remain disciplined in our approach. The strongest argument that I've heard on why we should increase our bid, simply that we can afford to, is not one that I favor. We've yet to see tangible evidence that our bid substantially undervalues the company. In fact, we see the opposite. Yahoo continues to lose search share, and profitability continues to decline year on year. The results that they announced on Tuesday were in line with the guidance that they gave on their last earnings call on January 29th, after which their stock price closed at $19.05, and Wall Street analyst consensus on value was significantly decreased.
As outlined in our recent letter to the Yahoo board, unless we make progress with Yahoo towards an agreement by this weekend, we will reconsider our alternatives. We will provide updates as appropriate next week, these alternatives clearly including taking an offer to the Yahoo shareholders, or to withdraw our proposal and focus on other opportunities, both organic and inorganic.
Still many blogs and publications believe that Microsoft simply cannot afford to walk away from this bid and will take it hostile. Former Netscape founder Marc Andreessen, who is familiar with staring down Microsoft, explains the two primary hostile takeover tactics Microsoft could use:
- A tender offer, which we can equivalently call an exchange offer since the offer includes Microsoft stock that would be exchanged for Yahoo stock. This would be an offer by Microsoft to acquire Yahoo shares from existing Yahoo shareholders directly. Note that this hasn't happened yet; Microsoft's offer up until now has been made to Yahoo the company -- in a tender offer, the offer would be made directly to Yahoo's shareholders.
- A proxy fight by Microsoft to take control of Yahoo's board of directors -- to put in place a new Yahoo board that would accept Microsoft's current offer.
Google discussion boards are also buzzing, and shares dropped. Google user minhnguyen@imadethisdesign.com said:
Personally, I am against the deal. Microsoft has too much money now, and they don't know how to spend it. Why not spend a few billion and hire the best of the best to improve msn.com or create a new site and market it. The money can be better spent elsewhere, and as a potential investor, I would rather see Microsoft improve and expand their products.
Another user, jtk2002, said:
If MSFT is smart, they'll withdraw their bid immediately and watch YHOO sink. Once YHOO's share price bottoms out then dangle another bid, a lower bid, in front of their eyes and see if YHOO learns their lesson and bites. While they play this little game with YHOO, Microsoft can be working on setting up their proxy.
User tort_vet on Yahoo!'s message boards wrote:
Dear Microsoft management, Do you have any idea how incompetent you are looking at this moment? You place a deadline on Yahoo and then don't even have a plan in place for the next step? No press release, no discussion, just a worthless, phantom deadline come and gone in complete silence. Truly one of the saddest things I have ever seen. Perhaps the proxy that should be taking place is one by Microsoft shareholders because this type of managerial incompetence is quite simply unacceptable.
I guess we will just have to wait for Microsoft to take the next step. Here's Microsoft's official Yahoo-Microsoft deal Web site. - Maria Woehr
See Dealscape: Microsoft mulling purchase of Czech Internet company?
See TheDeal.com: Hostility looms for Microsoft-Yahoo!
See Google: Discussion Board
See Yahoo: Discussion Board
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So much simpler to just pay $35 and get it over with. Both sides need to grow up and give a little.