Breaking up is hard to do, especially when there's billions of dollars involved. Ask shareholders of Yahoo! Inc. [YHOO] who are fleeing the stock after Microsoft Corp. [MSFT] withdrew its $5 billion offer. The Sunnyvale, Calif.-based company is down $4.08, or 14.23%, to $24.59, making it the No. 3 decliner overall on the Nasdaq in Monday midday trading. The parting of ways between the two tech titans set a negative tone for Monday trading as the Dow is trading down 88.01, or 0.67% to 12,970.19, while the Nasdaq declined 12.10, or .45% to 2,475.86.
Continue reading below
Some Yahoo! investors fear that Microsoft's withdrawal was the loss of a good opportunity to bolster the company, whose stock and earnings have been in a malaise over the last couple of quarters.
Microsoft CEO Steve Ballmer said: "After careful consideration, we believe the economics demanded by Yahoo! do not make sense for us, and it is in the best interests of Microsoft stockholders, employees and other stakeholders to withdraw our proposal."
Microsoft is trading up 55 cents, or 1.85%, to $29.78. For Yahoo!, the end of Microsoft's pursuit will allow it to improve its focus, which may include some dealmaking. During the battle to fend off Microsoft, however, Yahoo! didn't lay idle, acquiring venture capital-backed Maven Networks Inc. for about $160 million on Feb. 12 and IndexTools, which makes Web analytics software for online marketing, on April 9. Although reports say a Yahoo!-News Corp. [NWS] hookup has cooled off, the markets will still be keeping an eye on the Ruport Murdoch media titan.
Investors are also having doubts on Bank of America Corp.'s [BAC] proposed acquisition of mortgage lender Countrywide Financial Corp. [CFC]. Shares of Countrywide dropped 77 cents, or 12.88%, to $5.21 as brokerage firm Friedman, Billings, Ramsey & Co. said Bank of America is likely to renegotiate or pull its offer to buy the company. The opinion follows an S&P credit rating downgrade of Countrywide on May 2 to a speculative rating of "BB+/B" from an investment grade level of "BBB+/A-2."
The downgrade follows Bank of America's May 1 filing of a form S-4/A, which according to S&P states: "As part of its integration planning in connection with the merger, Bank of America is currently evaluating alternatives for the disposition of the remaining Countrywide indebtedness, including the possibility of redeeming, assuming, or guaranteeing some or all of this debt, or allowing it to remain outstanding as obligations of Countrywide (and not Bank of America)." In other words, Bank of Americas is not backing all of Countrywide's debt.
Lastly, shares of media company WPP Group plc [WPPGY] are down 36 cents, or .58%, to $61.54 as market research group Taylor Nelson Sofres plc rejected its $1.9 billion offer. "The [TNS] board has no hesitation in rejecting this opportunistic proposal as it substantially undervalues the company even on a standalone basis," said TNS chairman Donald Brydon. - Gerald Magpily
