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Apr-29-2008Microsoft's Hostile Play(topic overview)
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Oracle Corp. followed a similar playbook last year to acquire BEA Systems Inc." That's when Microsoft chief financial officer Chris Liddell said that his company would abide by the April 26 deadline, meaning a proxy fight would then ensue. (If this seems to contradict Blodget's contention that "Microsoft's public statements have now gone beyond threats to what appears to us to be acceptance and resignation" about the deal falling apart, it does.) CNBC left no doubt about how it expects the deal to turn out: "A Microsoft deadline for Internet service company Yahoo to accept its $44.6 billion acquisition offer expired at midnight Saturday, setting the stage for a hostile takeover bid by the software giant." Though CNBC, like the Journal, mentioned Microsoft's soft earnings report, released Friday, it did not explain how this had an impact on the company's stock price, complicating a potential deal. [1] Analysts are picking that Microsoft will launch a hostile takeover of Yahoo. SEATTLE - Most Wall St analysts are predicting that Microsoft will shortly prepare to launch a hostile bid for internet service company Yahoo at its current price of US$31 (39.52) per share in cash and stock. They believe Microsoft now faces a drawn-out proxy campaign to win its unsolicited takeover of Yahoo. A Microsoft deadline for Yahoo to accept its US$44.6 billion acquisition offer has now expired, setting the stage for a hostile takeover bid by the software giant.[2]
SAN FRANCISCO (AFP) — A Microsoft deadline for Internet service company Yahoo to accept its 44.6 billion-dollar (28.5 billion-euro) acquisition offer expired at midnight Saturday, setting the stage for a hostile takeover bid by the software giant. The expiration of the Sunday 0700 GMT deadline -- without comment from either side -- was likely to pave the way for an ugly proxy battle -- a fight by Microsoft for a vote by Yahoo shareholders to place pro-Microsoft officials on its board of directors.[3] Microsoft Corp.' s three-week deadline for Yahoo Inc. to accept its $44.6 billion offer expired at midnight Apr. 27, setting the stage for a hostile takeover bid by the software giant, according to Agence France Presse. The expiration of ultimatum, without comment from either party, is now perceived to pave the way for an ugly proxy battlea fight by Microsoft for a vote by Yahoo shareholders to place pro-Microsoft officials on its board of directors.[4]
Microsoft CEO Steve Ballmer had threatened to either take the offer direct to shareholders, or even call off the bid if Yahoo! did not accept the deal. While neither party has made any announcements since the deadline passed, nineteen analyst companies out of twenty-five questioned by Reuters said they expect Microsoft to attempt a hostile takeover without increasing their offer, potentially resulting in a long proxy fight. "I'm betting that Ballmer is bluffing with his 'walk away' comments and that he's going hostile," said Jefferies & Co. analyst Youssef Squali. Only three brokerages expected Microsoft to improve its offer, while three more though that Microsoft would walk away.[5] Ballmer gave Yahoo an ultimatum to accept a $44.6 billion (R342 billion) bid by last weekend. Now he is left to decide whether to walk away or begin Microsoft's first hostile takeover battle. If he fights, he has to consider if he should hold firm on the price or offer a better deal to win over shareholders.[6]
Microsoft CEO Ballmer must decide whether to walk away from a $42.7bn offer for Yahoo or launch a hostile takeover. Mon Apr 28 04:45:14 GMT+02:00 2008 Steve Ballmer is facing one of the biggest decisions of his career: Walk away from Microsoft Corp.' s $42.7 billion acquisition offer for Yahoo Inc. or launch the largest hostile takeover battle in tech-industry history. The choice comes after Yahoo declined to agree to a deal by the Saturday deadline set by the Microsoft's chief executive -- and after the two sides failed to make any progress in recent weeks in resolving the disagreement over price that has divided them over the last three months.[7] The deadline that Microsoft gave Yahoo to respond to its $44.6bn (22.4bn) takeover offer has expired. Microsoft chief executive Steve Ballmer gave Yahoo an ultimatum to accept the billion bid last night but now he has to decide whether to walk away or begin the company's first hostile takeover battle.[8]
Microsoft has three clear paths to take with regards to Yah oo acquisition: It can make a hostile bid, raise its offer or walk away and hope for a better price later. Given that Microsoft's "negotiate or else" deadline passed Saturday the software giant should be making its move soon in what could be CEO Steve Ballmer's most important decision of his career. Marc Andreessen outlines the case for a hostile takeover and it's a good one: Yahoo doesn't have a staggered board so Microsoft could toss the board all at once.[9]
In an open letter to the Yahoo board of directors on April 5, Microsoft CEO Steve Ballmer gave the Internet giant three weeks to accept the USD 31 dollar per share bid - an offer which expired yesterday - or face a hostile takeover. He also warned that Microsoft could drop its bid price.[10] Steve Ballmer, Microsoft's chief executive, will decide this week whether to step up his campaign against Yahoo! and is likely to nominate an alternative board of directors and demand that its target set a date for its annual meeting. The software giant, which has failed to bring Yahoo! to the table after its $41 billion (£20.6 billion) hostile bid, has signed up "credible, independent" nominees to negotiate a takeover. It is possible that Mr Ballmer could abandon the bid. Last week he surprised his camp with remarks, made at a conference in Italy, that he could drop it, but, while his comments were serious, few believe that he will do so at this point. The opinion of Yahoo! shareholders has yet to be tested and, with Microsoft nominating an alternative board, Mr Ballmer would be able to establish how much support he has for the bid of $29.43 a share.[11] The lack of communication is the latest sign of a chasm that has developed since Microsoft Chief Executive Steve Ballmer lashed out at Yahoo's board in an April 5 letter. In that missive, Ballmer set an April 26 deadline for accepting his company's cash-and-stock offer, which was worth $42.2 billion, or $29.31 per share, in late afternoon trading Monday. Yahoo let the Saturday deadline lapse without elaborating on its board's unanimous opinion that the Sunnyvale-based company's slumping Internet franchise is worth more. Microsoft is expected to disclose its response to Yahoo's defiance this week.[12] Neither of the two sides made any comment yesterday as the deadline came and went. By contrast, the general view in February when Microsoft announced its offer was that Yahoo would agree to a friendly merger if Microsoft only sweetened its bid. By mid-March, a Reuters poll showed that Wall St expected Microsoft to buy Yahoo without raising its price. Microsoft last week repeated chief executive Steve Ballmer's three-week-old threat that his company would go hostile, or even call off its bid, if Yahoo did not agree to a deal before last weekend. Microsoft executives are to disclose their next move this week.[2] Microsoft Chief Executive Steve Ballmer threatened three weeks ago to launch a hostile takeover of Yahoo if the companies had not concluded an agreement by today. Chief Financial Officer Chris Liddell softened the mandate slightly: Microsoft must "make progress with Yahoo towards an agreement by this weekend," or it will consider alternatives including a hostile bid or dropping the deal. Barring successful eleventh-hour negotiations, Liddell said Microsoft will make its move next week.[13] Microsoft has yet to make any decisive moves on the takeover -- either by launching a proxy battle or by raising its bid (as far as we know) -- and all the while, Ballmer and CFO Chris Liddell have griped that the deal is taking too long to close. Three weeks ago, when Steve Ballmer first threatened to take his bid hostile, he was well aware that Yahoo was waiting for a sweeter offer.[14]
Analysts believe that Google only benefits while Yahoo and Microsoft are distracted by the takeover quest. "Yahoo has a hard decision to make," Silicon Valley analyst Rob Enderle told AFP. "They have to call Microsoft's bluff and if Microsoft isn't bluffing and this goes hostile, it is going to be expensive for both companies." Yahoo posted unimpressive earnings in the first three months of this year, indicating to Enderle and other analysts that Microsoft's offer of 31 dollars per share is too high and that Ballmer might simply walk away from a deal. Other analysts believe Microsoft will increase its bid slightly late in the game -- though nothing near the 40 dollars per share desired by Yahoo's board. Microsoft reported that its profits slipped to 4.38 billion dollars in the first three months of the year despite revenues rising slightly to 14.45 billion dollars.[3] "All of a sudden Microsoft isn't offering a 60 percent more for Yahoo, but more like a 20 percent premium." A side deal in which Google would sell ads alongside Yahoo Web search services could push Yahoo shares into the low $30s, forcing Microsoft to raise its offer or walk away, he said. On January 29 -- the day before Microsoft presented Yahoo's board with an unsolicited takeover bid -- Yahoo warned it had a tough year ahead as it cut jobs and spent more to shore up its advertising business, sending its shares to four-year lows. In mid-March, Yahoo reaffirmed its income from operations should be line with its lowered outlook of $100 million-$110 million.[15]
Time runs out by Saturday, the date Microsoft has set for Yahoo to accept the deal or face a drawn-out proxy battle by Microsoft to unseat Yahoo's board. Two weeks ago the software giant threatened to lower its offer if Yahoo did not conclude friendly merger talks with Microsoft by April 26th. Yahoo's chief technology officer will use a speech on Thursday at the Web 2.0 Expo industry show to spell out a strategy to open up Yahoo services such as e-mail, news, sports and advertising to make them more relevant across the Web, not just for users drawn inside its own sites. That same day, Microsoft reports its own quarterly results. The software giant is expected to show strong underlying fundamentals across its range of businesses. Despite mounting time pressures -- and veiled threats by Microsoft to walk away from the deal if it drags on -- Wall Street analysts say they expect neither side to blink. Microsoft sees the massive merger as necessary for both to effectively compete with mutual arch-rival Google.[15]
The company hasn't set a date yet, but it must legally take place within 13 months after the last meeting, which was held June 12, 2007. Taking its case directly to Yahoo! shareholders in a tender offer would not repeal the poison pill, which allows a company to issue enough new shares to make acquiring it prohibitively expensive. Experts say Microsoft can go to court and argue that Yahoo! isn't acting in the best interest of its shareholders in rejecting an offer that provided a 62% premium to its stock. "It's conventional wisdom that a poison pill isn't usually effective in stopping a takeover with a hefty premium," says Michael Sullivan, a partner at law firm Howard, Rice, Nemerovski, Canady, Falk & Rabkin. Calling it quits is probably the least likely scenario for Microsoft because it's been eyeing Yahoo! for a long time. "They're probably disinclined to walk away from the deal," says Standard & Poor's analyst Scott Kessler.[16] Companies (at least publicly traded ones) are beholden to shareholders. They also are beholden to their employees. While most Softies are afraid to state for the record that they think Microsoft should abandon its takeover of Yahoo, that opinion is a real and prevailing sentiment among many in the Microsoft ranks. These aren't folks who are saying Microsoft should walk away from Yahoo so that Yahoo’s stock price will tank and Microsoft can swoop in and buy them later. They are folks who are opposed to a Microsoft takeover of Yahoo at any price. While it's tough to take over successfully a company where many of the employees don't want to work for you, it's potentially far worse to alienate your own employees by spending billions to buy technology and people with whom your rank and file have no interest in working. "Still, Mr. Ballmer faces opposition to the deal in his own ranks : Executives at several Microsoft divisions oppose the bid on grounds it will divert needed resources and attention from other challenges the company faces, said people familiar with the company. That sentiment is heightened as Microsoft heads into its annual budgeting season, said people familiar with the company."[17]
The ultimatum followed Yahoo's repeated rejection of Microsoft's February 1 bid, saying it is too low and one that undervalues the company. Analysts are divided about what Microsoft's next move would be, with some expecting Microsoft to go direct to Yahoo shareholders to oust its board, while others believe that Microsoft could simply walk away from the deal. Microsoft CFO Chris Liddell made clear this week that the company was prepared to drop the bid. He told company employees on Friday "We put what anyone reasonable would say was an incredibly generous offer on the table to try to facilitate a speedy transaction.[10]
The terms could differ from what Microsoft currently has on the table, which proposes a half-stock, half-cash transaction. In Ballmer's letter, he suggested a hostile takeover could reduce the value of Yahoo to Microsoft, and, presumably, what he'd be willing to pay. Yahoo's corporate bylaws include a "poison pill," provisions to prevent an acquirer from gaining control in this manner, but if enough shareholders formally express interest in selling, it would put tremendous pressure on Yahoo's board of directors. Microsoft would likely coordinate the exchange offer with a proxy fight a campaign to replace the Yahoo board with its own hand-picked candidates. They would stand for election at Yahoo's annual meeting, which has yet to be scheduled but must take place by July 12. If a majority of Microsoft's candidates were elected, they could approve the takeover proposal, perhaps at a lower price. Scott Keller, a founder and analyst at Deal Analytics, called this a "much more potent weapon."[13] In an open letter to the Yahoo board of directors April 5, Microsoft CEO Steve Ballmer gave the Internet service firm three weeks to accept the $31-a-share takeover offer or face a proxy fight. Yahoo's board of directors, however, maintained its claim, saying the offer "substantially undervalues" the firm, insisting the search engine pioneer is worth at least 40 dollars a share.[4] Microsoft shares, on the other hand, dipped as low as US$29.37 in early morning trading before rising to US$29.50 later in the session. Its trading price, however, was still down roughly 1 percent from its close of US$29.83 on Friday. As Microsoft's shares dip, the value of its initial cash-stock offer price of US$31 a share on February 1 further declines. This week, Microsoft is expected to lay out its next plan of action, which executives ranging from CEO Steve Ballmer to chief bean counter Chris Liddell have previously said could include going directly to Yahoo shareholders via a tender offer or a proxy fight, as well as withdrawing the offer.[18] The Redmond, Wash., software giant is willing and prepared to launch a proxy fight. In an April 5 letter, Microsoft Chief Executive Steve Ballmer gave Yahoo! a deadline of April 26 to accept its offer, now valued at $42 billion, given Microsoft's weakened stock price of $28.99. (The stock closed down 84 cents on Monday.)[16] Three weeks ago, the software giant's chief executive, Steve Ballmer, told Yahoo! it must accept Microsoft's 31 cents-per-share offer by 07:00 on Sunday April 27th. This date passed without comment from either side this weekend, leaving Yahoo facing a potential hostile takeover.[19]
Microsoft Yahoo! bid to go hostile say analysts (Mark Sutton) A poll of Wall Street analysts conducted by news agency Reuters show that the majority of brokerages expect Microsoft to launch a hostile takeover of Yahoo! in the next few days. A deadline set by Microsoft for the board of Yahoo! to accept its $31 per share offer expired.[5] A decision is likely to emerge in the next few days, with Yahoo facing a weekend deadline to accept the offer. Although the deadline expired Saturday, Microsoft has indicated it probably won't reveal its next move until early this week. The tense mating dance is at a standstill because Yahoo's board has repeatedly said it won't sell to Microsoft for less than $45 billion, even though the bid hoisted its stock shortly after it hit a four-year low in late January. The impasse has left most analysts predicting Microsoft will either sweeten its offer or attempt to replace Yahoo's board with a slate of directors who will embrace a takeover.[20] Yahoo CEO Jerry Yang has repeatedly spurned the $31-a-share bid, saying Yahoo'''s financial performance and No. 2 rank in the U.S. Internet search market merit a higher price. The current situation is that Microsoft is no closer to buying Yahoo than when it made its $44.6 billion bid nearly three months ago, leaving the software maker in a quandary over whether the deal is still worth pursuing. The impasse has left most analysts predicting Microsoft will either sweeten its offer or attempt to replace Yahoo'''s board with a slate of directors who will embrace a takeover.[21]
Now, that amicable offer could get downright hostile. Analysts say they believe Microsoft is planning to launch a hostile bid at its current price of $31 per share in cash and stock. Three weeks ago, Microsoft said it will go hostile, or even call off its bid, if Yahoo did not agree to a deal before this past weekend. Now, Microsoft executives are poised to play their next card.[22] Yahoo also tested an advertising partnership with Google, but the deal has come under scrutiny by federal regulators, who have antitrust concerns. Lindsay said that coming up with a deal is imperative for Yahoo if its management wants to keep the company independent. If shareholders see no change, he said, they undoubtedly will side with Microsoft at Yahoo's annual meeting, which is as yet unscheduled, but could be held in July or shortly thereafter. Another option that Microsoft executives increasingly mentioned last week is to drop their offer for Yahoo, originally priced at $31 per share, a 62 percent premium.[23]
"We are building social into everything we do." Since Microsoft unveiled its original $44-billion cash and stock offer in February, Yahoo has determinedly sought other suitors to help it remain independent. However its attempts to forge an alliance with News Corp floundered when Rupert Murdoch's company allied with Microsoft. Yahoo's plans for more limited alliances with Google and AOL have failed to convince many stockholders that they will yield more advantages than Microsoft's bid which offers a 60 percent premium on Yahoo's pre-bid share price.[24] Oracle Corp. followed a similar playbook last year to acquire BEA Systems Inc. If Microsoft pushes ahead with its proxy fight, its challenge will be in determining at what price it should pursue an exchange offer. The value of its bid has declined as its share price has fallen 8% since Jan. 31, when it offered Yahoo a combination of cash and stock then valued at $31 a share, or $44.6 billion. Microsoft's stock took another hit after the company disappointed investors with its earnings outlook; as a result, the bid value stood at $29.68 a share as of 4 p.m. Friday.[7]
Yahoo also has made overt maneuvers to buy itself time. On March 5, Yahoo lifted the following week's deadline for nominating directors to its board, an attempt to discourage Microsoft from launching a proxy fight to replace the current board with members willing to approve its Yahoo acquisition bid. Yahoo hasn't yet set a date for its shareholders' meeting. On March 18, Yahoo kicked off a tour to investors by dusting off a three-month-old financial plan to reinforce its contention that Yahoo is worth much more than Microsoft offered to pay for it. The plan, originally presented to Yahoo's board in December, predicts that Yahoo will double its operating cash flow over the next three years from US$1.9 billion to $3.7 billion. The plan also forecasts that, subtracting the commission that Yahoo pays to sites in its advertising network, Yahoo will generate $8.8 billion in revenue in 2010.[25] On April 5, Microsoft, clearly impatient, threatened Yahoo's board of directors with a proxy battle if it wouldn't agree to a buy-out in the next three weeks. That's the deadline that lapsed on Saturday. "The focus will be on Microsoft tomorrow to make some statement about its intentions," said industry analyst Greg Sterling from Sterling Market Intelligence. While there is still a reasonable chance that Microsoft will launch a proxy fight, it also seems much more likely than it did three weeks ago that Microsoft will drop its bid, Sterling said. Microsoft's management was clearly expecting a much smoother acquisition process, he said. "Microsoft's tone during the initial call was that this was pretty much 'fait accompli' and that they were already looking past the deal towards the integration process," Sterling said.[25]
Yahoo, the Sunnyvale Internet icon, has a 13-year history as an independent company, but recently has fallen into a financial slump. Microsoft, the Redmond, Wash., software-maker, is convinced that combining forces will bolster its online business, which trails far behind industry juggernaut Google Inc. Among Microsoft's options is to take its bid for Yahoo hostile by asking the portal's shareholders to replace Yahoo's board with a more merger-friendly slate of directors. Microsoft has said that if it chooses this route, called a proxy contest, it might lower its price for Yahoo to reflect the damage a fight might cause.[23] If Microsoft really wants Yahoo and Yahoo's board of directors won't budge it may try to gain control through a hostile takeover. This probably wouldn't involve an invasion of Yahoo's Sunnyvale, Calif., headquarters, but it's about as close as it comes in the business world. The attack would be two-pronged: Microsoft would invite Yahoo shareholders to exchange their stock in the company for a combination of cash and Microsoft stock. This is called an exchange offer (when the payoff is in stock) or a tender offer (when the payoff is in cash).[13] Now Microsoft must decide whether to pursue a hostile takeover via a proxy fight or to drop the bid and seek other acquisition alternatives. All along, Microsoft's management had indicated strongly that they would pursue Yahoo via all available options, including the hostile route of ousting the current board by proposing its own slate of director candidates at the next Yahoo shareholders' meeting.[25] Mr. Ballmer vowed in an April 5 letter "to take our case directly to your shareholders, including the initiation of a proxy contest to elect an alternative slate of directors for the Yahoo board." Mr. Ballmer faces opposition to the deal in his own ranks: Executives at several Microsoft divisions oppose the bid on grounds it will divert needed resources and attention from other challenges the company faces, said people familiar with the company. That sentiment is heightened as Microsoft heads into its annual budgeting season, said people familiar with the company. There was no direct contact between the two sides this past weekend and people close to both camps said they were preparing for the next stage of battle.[7]
Microsoft chief financial officer Chris Liddell disclosed Apr. 24 that the software giant is standing by the April 26 deadline. He added that the Microsoft will not increase the bid just because it can afford to do so, and that unless it makes progress with Yahoo on the deadline, it will explore its alternatives. Microsoft's other alternatives include withdrawing its offer, a move that could outrage Yahoo shareholders who have seen the software firm's offer sharply push up Yahoo's share price. Some have even threatened to sue the search engine firm's board for failing to maximize the value of their investment.[4] Ballmer, responding to questions about a possible outcome, said "we'll see" what the Yahoo board decides to do about the bid. If no deal is reached by this weekend, Microsoft may explore other options, such as trying to oust Yahoo'''s board or walking away from the offer, Chief Financial Officer Chris Liddell said Friday.[21] Taking the bid off the table for now could pave the way for a friendly deal in a few months if Yahoo Chief Executive Jerry Yang's turnaround efforts don't pan out. Should Yahoo's lackluster results of the past two years continue during the current quarter, which ends in June, its stock likely will sink even lower and open the door for Microsoft to return with another offer more likely to be embraced. Microsoft could also still sweeten its offer, although Ballmer and Liddell said last week that the company won't up the ante.[26] Yahoo's shares at that time were trading at $26.80 on the Nasdaq Stock Market. In his letter, Mr. Ballmer suggested Microsoft might offer less than the original bid if Yahoo didn't agree to a friendly deal.[7] Some analysts don't see how Yahoo can make the economics of an alternate deal work. Internet stock valuations have suffered from a weak economy this year and Yahoo share's price, currently above $28, could fall below its $19 level of late January without the support of Microsoft's standing offer, they argue. Squali says if Yahoo does a half decent job in its quarterly results, it could support a share price in the upper $20s.[15]
"We still believe (Microsoft) is committed to completing the transaction and is unlikely to walk away," Citigroup analyst Brent Thill wrote in a Friday note. McAdams Wright Ragen analyst Sid Parakh said he can't envision Microsoft raising its offer, especially since Yahoo's management hasn't proven its strategy will boost the company's stock price above $30 on its own. Microsoft's current bid is "already a stretch, and I don't see any reason for them to really bid against themselves," Parakh said. Yahoo could try to extract a higher bid by farming out some of the advertising on its Web site to Google.[20] Some analysts think Microsoft would be smart to walk away now. By turning a cold shoulder, Microsoft could position itself to return with another bid this summer in hopes of completing the acquisition without suffering through the disruption and rancor likely to erupt if Microsoft were to try to oust Yahoo's board in a risky process known as a proxy contest. This scenario could only pan out if Microsoft is correct in its belief that Yahoo is stuck in a downward spiral after steadily losing ground in the online advertising market during the past two years. Unless Yahoo can bounce back, its shares might eventually drop even lower than their $19.18 price when Microsoft made its initial bid of $31.[20] Some analysts think Microsoft would be smart to walk away now. By turning a cold shoulder, Microsoft could position itself to return with another bid this summer in hopes of completing the acquisition without suffering through the disruption and rancor likely to erupt if Microsoft were to try to oust Yahoo's board in a risky process known as a proxy contest. I'm not a poker fan, but I've watched enough Texas Hold 'Em to know we're watching to pro's trying hard not to give away their " tell " prior to the river card. Sitting in a smoke-filled room, Brad examines his hand one last time. Should he up the ante or should he fold.[27]
With Yahoo appearing resolute in resisting Microsoft's current bid, analysts are split on whether Microsoft will walk away, sweeten the offer, or launch a hostile bid that would try to circumvent Yahoo's board of directors. With Yahoo unable to offer any compelling alternative to investors in the short term, Microsoft is unlikely to increase its offer, most analysts believe.[24] The deadline for Yahoo to accept Microsoft's "friendly" takeover offer has now passed, and unless Yahoo says something soon, Steve Ballmer faces a big choice: get hostile or walk away. A good way to get hostile would be to put up candidates to be elected to Yahoo's board, replacing the current members, if they get enough votes.[28] New York - Microsoft chief executive Steve Ballmer is weighing a fight to oust Yahoo's board and pave the way for a takeover, after the internet company let his deadline pass without agreeing to a deal.[6] April 28 (Bloomberg) -- Microsoft Corp. Chief Executive Officer Steve Ballmer is weighing a fight to oust Yahoo! Inc.' s board and pave the way for a takeover, after the Internet company let his deadline pass without agreeing to a deal.[29]
"Microsoft is. unlikely to walk away from the deal," Citigroup analysts Brent Thill and Mark Mahaney in San Francisco wrote in a note to clients on Friday. Some Microsoft investors say Yahoo chief executive Jerry Yang would lose a proxy fight unless he finds an alternative that will boost his company's shares.[6] Yang has said repeatedly that Yahoo is worth more, citing investments in Asia, the company's No. 2 position in Internet searches and potential cost savings of the deal. Though Microsoft officials said last week that they won't raise the offer, analysts said it's still possible. "Ultimately, we view this as posturing,'' Heather Bellini, an analyst at UBS AG in New York, wrote in a note April 25. "Even if Microsoft tried to lower the value of the deal or walk away, we would expect them to eventually come back and raise it in order to consummate the transaction in a friendly manner,'' said Bellini, Institutional Investor magazine's top-ranked software analyst.[29] The weekend deadline for Yahoo to accept Microsoft's buyout offer has passed, with no new news. Now AP is speculating whether Microsoft is bluffing about its talk of abandoning its bid or if the software company might actually walk away from the deal.[27]
Nothing legitimizes a number more than seeing it in print. The Wall Street Journal was far less committal with its headline than Blodget, proving it had a firm grasp of the obvious: "Microsoft Confronts Tough Choice on Yahoo." That said, the story's reasoning was solid and more convincingly predicted that Microsoft wouldn't dare walk away. The story also appropriately drew a historical parallel between this deal and the Oracle ORCL - BEA Systems BEAS deal: "Ending its pursuit of Yahoo seems less likely following Mr. Ballmer's promise to go directly to shareholders after the deadline. Abandoning the bid following his public saber rattling might damage his own credibility as well as Microsoft's. Though Microsoft hasn't ruled out abandoning its pursuit, it is unlikely to do so, people close to the company said.[1]
Microsoft responded by pointing to comments Liddell made on Thursday during Microsoft's earnings announcement. "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," Liddell said then. Citing anonymous sources, The Wall Street Journal reported Sunday that Microsoft, Yahoo and their advisers have held talks in recent weeks but didn't achieve enough progress to hammer out a deal by Saturday. The process has clearly been frustrating for Microsoft's management, who have maintained that their offer is fair and that they don't see a reason to revise it. Ballmer and his team have shown signs of getting impatient with the slow progress, not surprising considering Microsoft's urgency at boosting its underperforming Internet business and competing better against Google.[25] Yahoo also has been exploring a possible merger with the online operations of Time Warner Inc.' s AOL, but most analysts view that as a weaker alternative to a Microsoft takeover. As it stands now, Yahoo's first-quarter revenue growth of 9 percent is far behind both Google's and Microsoft's online services division, which climbed 42 percent and 40 percent, respectively. That's just one reason Garrity believes Ballmer and Liddell are realizing that Microsoft doesn't need Yahoo at any price. "Sometimes the best deals are the ones that aren't done," he said. AP Technology Writer Jessica Mintz in Seattle contributed to this story.[20] Jeffrey Lindsay, an analyst with Sanford Bernstein & Co., said that Microsoft CEO Steve Ballmer is likely to start a hostile bid, regardless. "Ballmer will make good on his ultimatum," Lindsay said. "I don't think he would like to pick up a reputation for not following through." Yahoo has been busy trying to cobble together an alternative to a Microsoft takeover, including holding discussions with Time Warner Inc. and News Corp. about taking control of their Internet properties.[23] No news emerged over the weekend from the respective Yahoo and Microsoft camps regarding the deadline set by Steve Ballmer for Yahoo to begin negotiating in earnest with Microsoft. Facing a talk or else Saturday deadline, it looks like Yahoo opted for 'else', setting the challenge for Microsoft to spend heavily on escalating its hostile takeover of the portal. Microsoft wants Yahoo's second-place search traffic added to its third-place properties of MSN Search and Live Search to capitalize on paid search advertising.[30] Microsoft CEO Steve Ballmer's weekend deadline for Yahoo to respond to his company's takeover offer has come and gone with no comment out of either company, no new SEC filings (as of this writing), and an eerie quiet out in takeover land. That quiet might not last, at least for the rest of the industry. Netscape co-founder Marc Andreessen has written a lengthy piece, based on questions and answers with a couple of experts, on what options are left for both Microsoft and Yahoo.[31]
The deadline which Microsoft gave Yahoo to respond to its $44.6bn ('22.4bn) takeover offer has expired, paving the way for a hostile takeover battle. Microsoft gave its rival until Sunday to accept its bid, something which Yahoo has showed no sign of doing after dismissing the offer as inadequate.[32] Microsofts deadline for Yahoo to accept its takeover bid expired on Sunday. Microsoft said that if Yahoo failed to accept its $44.6 billion takeover offer by 27 April 2008, then it would launch a hostile takeover bid at a lower price.[33] REDMOND, April 28: The deadline for Yahoo Irene Lew Normal Irene Lew 1 0 2008-04-28T18:36:00Z 2008-04-28T18:36:00Z 1 1 1 11.512 150 0 0 REDMOND, April 28: The deadline for Yahoo! to come to a decision on Microsoft's $42.7-billion offer passed this weekend with no announcement from either side and the looming possibility of a hostile takeover bid.[34]
SEATTLE, April 27 (UPI) -- The offer deadline for Yahoo! by U.S. software giant Microsoft Corp. passed without comment, signaling a possible hostile takeover attempt, executives say.[35]
Keller called it a moderate possibility. Sid Parakh, technology analyst with McAdams Wright Ragen, said he thinks Microsoft will attempt a hostile takeover likely involving a lower price. Outcome: This would kick off a long, acrimonious few months as the companies step up campaigns to sway Yahoo investor opinion before the shareholder meeting. It could continue distracting executive and employee attention at both companies from their efforts to catch runaway online advertising leader Google the impetus for the combination in the first place.[13] Just last fall, Oracle Corp. withdrew a $6.7 billion bid for rival business software maker BEA Systems Inc. after being spurned and then wrapped up the takeover for $8.5 billion three months later. Other analysts remain convinced Microsoft will either raise its bid or launch a proxy contest because it needs Yahoo's franchise to mount a more serious challenge Google Inc.' s dominance of the Internet's search and advertising market.[20] While having Yahoo would accelerate Microsoft's efforts to gain a bigger slice of the online advertising market, forecast to reach $80 billion by 2010, Liddell said the company has a strategy to do so without the Internet giant. If it walks away, Microsoft would keep investing in its own online services, including Internet search and e-mail; improving tools for digital advertisers and publishers; and increasing use of its products. Microsoft will also continue to buy companies that would help in these areas, Liddell said. Likelihood: Tech pundit Henry Blodget wrote Friday that he puts the chance of Microsoft dropping its bid at 60 percent. Others say Microsoft is committed. "I don't think they'll quit. I think they've got too much invested to quit, and frankly nothing's happened that they shouldn't have anticipated going in," said Philip Bromiley, professor of business strategy at University of California, Irvine. Parakh gives this option about a 10 percent probability.[13]
Microsoft shares fell by $1.97 to $29.83 on Friday pushing down the value of Yahoo bid to $42.7 billion, or $29.68 per share. There are speculations that Microsoft will raise its bid since it needs Yahoo to better compete with Google in the Internet search and advertising market.[36] The decline lowered the value of the Yahoo bid to $42.7 billion, or $29.68 per share. If Yahoo's stock were to plummet into the mid-teens, Microsoft conceivably could return with another offer that would probably be more warmly received than its original bid.[20]
Yahoo Inc faces a critical week that could decide whether the pioneering Web company can remain independent or must surrender to an unsolicited takeover by Microsoft Corp. Yahoo is racing to forge a credible alternative that lets it stay independent or at least forces Microsoft to raise its $31 a share cash-and-stock bid, now valued at $42.8 billion.[15] Microsoft officials were also reportedly preparing a response to Yahoo that could come out today or tomorrow. Speaking in Madrid last week, CEO Steve Ballmer reiterated that his company saw no reason to raise its bid for Yahoo above the current price, which now stands at $29.68 a share.[37] How could it have become so adversarial? Surely something ugly may be at hand. Did Steve Ballmer envision this type of scenario when launching his original bid for Yahoo? Did he ever imagine the attempted synergy would become a battle of wills as much as money? To what degree does pride factor into this pending recipe for disaster? I dare say that is what it has all come down to now. Pride goes before a fall, they say. Does Steve Ballmer have the grace within him to fold his tents and quietly withdraw? Or shall his siege works be lain against the walls of Yahoo in an attempt to forcibly take it? Already he has warned that he will appeal to the sensibilities of Yahoo's investor rank and file. It's a tactic which has been used in many a war. Attempting to romance the populace away from their leaders seldom, if ever, has worked. In the meantime, Microsoft's own shares are on the decline, diluting the strength of its acceptable offer. I submit to you that at this time Microsoft should disengage from the situation entirely.[38] Microsoft chief Steve Ballmer said if the deadline passed, the initial bid of a cash-and-stock offer valued at $29.68 per share would diminish significantly, The Wall Street Journal said Sunday.[35]
Microsoft chief exec Steve Ballmer said Friday the company'''s $44.6 billion bid for Yahoo is "quite generous."[21] The architects of Microsoft's bid — Chief Executive Steve Ballmer and Chief Financial Officer Chris Liddell — have been signaling the Redmond, Wash. -based company might abandon the bid and leave Sunnyvale-based Yahoo twisting in the wind.[20] Last week Microsoft reported an 11 per cent drop in quarterly profits, by contrast Yahoo posted strong results in its first quarter. Steve Ballmer, CEO of Microsoft said last week that the company would not abandon its takeover bid if Yahoo posted good first quarter results.[33] Microsoft's bid to take over Yahoo is still ongoing, but with the three week deadline set by Steve Ballmer for a decision from the Yahoo board on a friendly takeover having gone by without comment on Saturday, the gloves are now coming off, and Microsoft will have to decide which way to play it now.[39]
SAN FRANCISCO: Yahoo maintained a defiant silence on Microsoft's $40-billion takeover bid, as Saturday's deadline to wrap up the deal came down to the wire. Instead of publicly responding to the software giant's ultimatum, Yahoo ignored the issue entirely and instead unveiled plans to rewire its Internet services to make them more flexible for users and more compatible with other websites.[24] SAN FRANCISCO (AP) — Microsoft Corp. is no closer to buying Yahoo Inc. than when it made its $44.6 billion bid nearly three months ago, leaving the software maker in a quandary over whether the deal is still worth pursuing.[20]
In the meantime, Google would no doubt seek to capitalize on the internal turmoil within Microsoft and Yahoo by trying to poach clients and valuable employees. As soon as Microsoft announced its bid for Yahoo on Feb. 1 -- valued at US$44.6 billion at the time -- Yahoo's management began seeking and considering alternatives, while its stock began to rise from the latest pre-bid price of $19.18.[25] The value of the bid, originally $31 in cash and stock, has dropped to $29.28 based on Microsoft's closing price. Microsoft has spent billions creating a Web search engine and technology to sell ads, and buying Internet companies such as AQuantive Inc. Acquiring Yahoo would give it the No. 2 spot in the $41 billion online ad market.[29]
The threat puts intense pressure on Yahoo's board from shareholders, because the value of the stock would likely plummet. Microsoft executives said last week that they could focus on reinvigorating their online business without Yahoo. Dropping the bid might also be a ploy; they could come back later, presumably after Yahoo's board and its shareholders sweated it out and finally saw the wisdom of a deal.[23] "I honestly have no idea," says Derek Brown, an analyst with Cantor Fitzgerald. "Our view hasn't changed from the beginning -- we think a Microsoft acquisition of Yahoo is the most likely outcome, which meets the needs of both companies. In the meantime, Microsoft shares have fallen 8 percent since it first submitted its bid for Yahoo, which is a pretty good indicator that shareholders want nothing to do with the deal.[14]
No statements, no posturing, nary a peep. Microsoft could be ready to walk away from the deal, an action that wouldn't harm them greatly but poses a threat to Yahoo's stock, which climbed in value with the initial announcement of Microsoft's bid.[30]
The rest of the Internet industry is in hurry-up-and-wait mode for something new to happen with the deal. The easiest course seems to be for Microsoft to raise its bid enough for Yahoo to save face with investors while accepting the offer.[30] The announcement of Yahoo's intended conversion to a social hub was made at the Web 2.0 conference in San Francisco by Yahoo chief technology officer Ari Balogh, who dubbed the initiative "Yahoo Open Strategy". The announcement reinforced expectations that the internet pioneer would remain steadfast in its rejection of Microsoft's bid, which Yahoo argues fails to take into account the company's imminent growth prospects. Under the new system, Yahoo's 500 million users will be able to seamlessly integrate content from across Yahoo's entire web empire into their personal network. The idea is to combine Yahoo's popular mail, instant message and personalized web pages with features from Yahoo's photo-sharing site Flickr, its bookmarking site del.icio.us and others.[24]
The three-week deadline that Microsoft (MSFT) gave Yahoo (YHOO) to come to an agreement on its unsolicited bid for the Internet media company passed this weekend without any announcement. The developments leave most Wall Street analysts betting that MSFT's bid will turn hostile, with a minority guessing the software giant will drop its bid all together.[37] Microsoft's unwanted courtship of Yahoo has hit a critical point as a deadline arrives for the struggling internet pioneer to accept the software giant's takeover offer.[40] Yahoo! has apparently allowed a Saturday deadline to accept or negotiate Microsoft's $31-a-share offer to pass quietly. Microsoft recently gave plenty of clues that if Yahoo! didn't accept, it would either go it alone, or announce a hostile proxy action to secure its rival for search-advertising market share.[41] Yahoo! shares had closed just above $19 the day before Microsoft's offer. For its part, Yahoo! isn't worried about a fight over control of its board, because the company "has a fair degree of confidence that it has a strong block of votes in the of a proxy battle," Kay says.[41] Last month, Yahoo! withdrew a deadline for the nomination of directors to its board and the company has yet to set a date for its annual meeting. Under the law of Delaware, the state in which Yahoo! is incorporated, the company must hold its annual meeting within 13 months of the previous one, with the last date being July 12. Microsoft could also launch a formal exchange offer, into which Yahoo! investors could tender their shares, but it is reluctant to do so.[11]
"We think we can accelerate our strategy by buying Yahoo and we will pay what makes sense for us to pay for our shareholders." Microsoft's options also include withdrawing its offer, a move that could outrage Yahoo shareholders who have seen Microsoft's offer sharply push up Yahoo's share price. Some have threatened to sue Yahoo's board for failing in its duty to maximize the value of their investment.[3] Jan. 31: Microsoft CEO Steve Ballmer makes the offer and tells Yahoo's board, "Depending on the nature of your response, Microsoft reserves the right to pursue all necessary steps to ensure that Yahoo!'s shareholders are provided with the opportunity to realize the value inherent in our proposal." He doesn't go into detail on the potential "necessary steps."[42] On April 5, Microsoft's CEO, Steve Ballmer, stated in a letter to Yahoo!'s Board of Directors that if the April 26 deadline was not met, 'We will be compelled to take our case directly to your shareholders, including the initiation of a proxy contest to elect an alternative slate of directors for the Yahoo! Board.[34] April 5: In a follow-up letter, Ballmer gives Yahoo the three-week deadline and warns, "If we have not concluded an agreement within the next three weeks, we will be compelled to take our case directly to your shareholders, including the initiation of a proxy contest to elect an alternative slate of directors for the Yahoo! board."[42]
"In any negotiation, your first offer is not always your last," Tobias says. Let's say Microsoft sends out the proxy materials with its own slate of board nominees this week; conservatively, those potential board members probably wouldn't get nominated until late June or July, when Yahoo is expected to schedule its annual shareholder meeting.[14] Microsoft Chief Financial Officer Chris Liddel said Thursday the company could take the offer to shareholders, put pressure on Yahoo!'s board or remove the offer altogether. A decision is expected this week.[35]
The outcome of the so-called proxy contest probably wouldn't be settled until Yahoo's annual meeting, which might not be held until July. Both Ballmer and Microsoft's Chief Financial Officer, Chris Liddell, publicly suggested last week that the Redmond, Washington-based software maker might retract its offer -- a move that would likely cause Yahoo's stock to plummet.[26] Options include a proxy fight or walking away from the offer and building Microsoft's Web unit without Sunnyvale, California- based Yahoo, using other investments and partnerships, Chief Financial Officer Chris Liddell said.[29]
"Every day that goes by, Google gets better and better and takes more share." Last week Microsoft Chief Financial Officer Chris Liddell said the company would announce a plan this week for how it will proceed with Yahoo![16] Microsoft's chief financial officer Chris Liddell last week confirmed the company's position. "With respect to Yahoo we have been clear: speed is of the essence," he said.[19]
The threats are also a common negotiating tactic intended to pressure a reluctant company to acquiesce to a takeover bid. Yahoo's board unanimously rejected Microsoft's overture early in the merger dance, saying that it substantially undervalued the company, given its big brand name, international reach and hundreds of millions of users. Last week, Yahoo CEO Jerry Yang said he's not opposed to a merger, but that he would only agree to one at a higher price.[23] If Mr. Ballmer follows through with that threat, Yahoo could face tough questions from some shareholders angered that it has refused Microsoft's offer. Some Yahoo shareholders have already sued the company's directors for acting against shareholder interests in their handling of Microsoft's takeover attempt.[7] Factor in intangibleskeeping key workers, maintaining sites and advertiser relationsand a hostile takeover could do a lot of damage. That's why Ballmer's best choice may be to walk away currently the second least likely event according to Mahaney's cheat sheet. If Microsoft walks, Yahoo will have to face its own shareholders.[9] The Wall Street Journal indicates that Ballmer is dealing with opposition from within Microsoft, with some executives concerned that a hostile takeover of Yahoo! would divert resources away from fixing the company's own problems.[34]
Most analysts believe Microsoft wants Yahoo badly enough to attempt a hostile takeover, a risky process that would probably include a mudslinging campaign to replace Yahoo's 10 directors with board members more receptive to a deal.[12]
Global Crown Capital analyst Martin Pyykkonen gives Microsoft more credit for how it has played the courtship game. If the two do not reach a deal this week, the stand-off could drag on for months. Yahoo has until mid-July to hold its annual shareholder meeting -- where Microsoft could propose its own slate of directors.[15] Anything's possible. Ballmer and Yahoo co-founder and CEO Jerry Yang, with their lawyers and investment bankers in tow, could decide to get together for a backyard barbecue to talk things out. If they start to make real progress toward a deal, Microsoft would be unlikely to derail the talks even though its deadline has passed. Likelihood: Rumors may well fly this weekend, but the companies have met informally on several occasions to no avail. Both companies reported quarterly earnings this week, and the numbers did little to tilt the balance of investor opinion.[13] Links 28/04/2008: Weak Forecast for Microsoft; GNU/Linux at Nokia and Ampro swallow a hand-grenade''' Microsoft/Yahoo Deadline Passes With No Deal Microsoft talks tough on Yahoo, reports 11 pct profit drop Microsoft May Start A Fight To Oust Yahoo Board, As Deadline Passes, Says Report Microsoft: Pondering the alternatives to Yahoo Microsoft: Massive site attacks not our fault Microsoft falls on weak forecasts Failed Microsoft gadget dies a quiet death Linux on the desktop, your time has come.[43]
Yahoo! has sought alternatives to a takeover by Microsoft, holding talks with MySpace over a potential deal with the News Corporation-owned social networking site, as well as looking with Time Warner at a potential alliance with AOL.[19]
Walking away could still draw Yahoo into Microsoft's arms if Yahoo's share price falls on the news. That could spark more investor pressure to strike a deal with Microsoft.[1] Yahoo shares fell slightly in morning trading Monday, following the passing of Microsoft's closely watched Saturday deadline without the parties hammering out a merger deal. Shares of Yahoo dipped to US$26.60 per share in morning trading, off 0.75 percent from its close of US$26.80 on Friday.[18] Indicating investors aren't expecting a higher bid, Yahoo shares were unchanged at $26.80 in Monday's late afternoon trading while Microsoft shares shed 79 cents to $29.04. In an even more remote possibility, Microsoft could set another negotiating deadline in hopes that its executives might be able to reopen talks with their Yahoo counterparts.[12] Yahoo hasn't come up with alternatives to Microsoft's $31 a share bid (if Yahoo did we would have heard about them).[43] Yahoo shares fell 50 cents to finish Friday at $26.80, pulled down by the declining value of Microsoft's cash-and-stock bid.[20] Yahoo shares dropped by 50 cents to $26.80 last Friday following a decline in the value of Microsofts cash-and-stock bid.[36]
Likelihood: Low. There are still analysts who think Microsoft has room to offer $1 or $2 more per share, making its offer nearly irresistible compared with Yahoo's less-certain go-it-alone or partnership strategies.[13] "Microsoft is likely to back off for now," says Roger Kay, a stock analyst with Endpoint Technologies Associates. "I don't think they are going to raise the bid. If they back off and Yahoo!'s stock price tanks, Microsoft is free to come back in and offer a lower price, demonstrating that it was the bid that was keeping the price higher -- not Yahoo!'s assertion that it was because of locked future value."[41] "I'm betting that Ballmer is bluffing with his `walk away' comments and that he's going hostile," said Jefferies & Co analyst Youssef Squali, who believes Microsoft will stick with its US$31-per-share offer. Nineteen brokerages now say they expect Microsoft in coming days to move forward with a hostile bid. Only three brokerages see the possibility that the two sides will end their stand-off over price and begin negotiations to reach a deal at a slightly higher price.[2] " has known for some time that this was a possibility and eventuality," says Carl Tobias, a professor at the Richmond School of Law. "In a situation like this, it shouldn't take very long The next move is probably Microsoft's -- I think Ballmer needs to say what the company's intentions are." That's precisely why Microsoft's silence on Saturday was so deafening. (Ballmer previously said the company would take its bid hostile on Saturday if there wasn't a deal in place.) Although Ballmer and friends say they want the deal done yesterday, they haven't done much to prove it. "Our goal in making such a generous offer was to create the basis for a speedy and ultimately friendly transaction.[14]
Microsoft was unlikely to make a move on Monday, however, people familiar with the matter said. Ending its pursuit of Yahoo seems less likely following Mr. Ballmer's promise to go directly to shareholders after the deadline. Abandoning the bid following his public saber rattling might damage his own credibility as well as Microsoft's. Though Microsoft hasn't ruled out abandoning its pursuit, it is unlikely to do so, people close the company said.[7] "Microsoft will most likely have to initiate a hostile bid." Once Microsoft sets in motion a campaign to go directly to shareholders, Yahoo's response would be to come forward with its own plan to merge with AOL and turn over search ad sales to Google, arguing this has more long-term value, Lindsay said.[15] When it reports first-quarter results on Tuesday, Yahoo has perhaps a last chance to demonstrate some financial strength and progress it has made in stabilizing the company's Internet media and advertising business after two years of decline. Mid-week, Yahoo is set to complete a test with Google Inc on whether Google should run a piece of its Web search ad sales, a move sources familiar with the talks say is part of a plan to merge with Time Warner's AOL and fend off Microsoft.[15] Microsoft's interest in Yahoo centers mainly on one thing: the lucrative online advertising business and Google's seemingly unstoppable domination of it. A Microsoft-Yahoo marriage, the thinking goes, would mean stronger competition in the market while potentially strengthening Microsoft in areas outside its core software business. As the deadline kicks in, here's a look at the options available to the company, along with the likelihood of each (according to observers tracking the deal), and their possible outcomes.[13]
Financial analysts agreed the plan is highly optimistic. Yahoo also has been in hyperactive mode with product and strategy announcements since Microsoft's bid, always pointing out that each initiative proved that it is able to improve its situation as an independent company. It acquired online video player Maven Networks, announced its social network OneConnect mobile service, re-launched its video site and introduced Yahoo Buzz, a social news site that has been well received. It also announced AMP, a new advertising management platform that it says will greatly simplify buying and selling ads online, and that will roll out in phases starting in 2008's third quarter and continuing into 2009.[25] Just two days later, Yahoo announced it was exploring an Internet advertising partnership with Google Inc., whose dominance of the online search market was the main trigger for Microsoft's bid. AP Technology Writer Jessica Mintz in Redmond, Wash., contributed to this story.[12] Microsoft made the original bid on the grounds that teaming up with Yahoo would provide a strong competitor for Google, who dominate the global online advertising market.[33]
Hilal also notes that Microsoft probably won't use the strategy of walking away from Yahoo! temporarily in hopes of coming back later with a lower offer, because it can't afford to lose any more ground to archrival Google (nasdaq: GOOG - news - people ) in online advertising. "Time is of the essence," he says.[16] The world's biggest software maker could not afford to let Yahoo go, Sachin Shah, an analyst for Icap Securities in New Jersey, said last week. To crack Google's dominance of the internet advertising market, Microsoft is looking to handle more Web searches, sell advertisements with more graphics and videos, and be able to target campaigns and track their success.[6] There is no doubt that Microsoft could live without Yahoo, but acquiring Yahoo would put it in a much better position to compete against Google in the Internet search and advertising arena.[10]
Yahoo shares closed at $26.80. From Microsoft's perspective, it would be on its own trying to close a yawning gap with Google. Its share of U.S. Internet searches was 9.4 percent in March, compared with Google's 59.8 percent, according to comScore.[13] "Expectations are sooooo L-O-W," Gillis said. Google shares soared 20 percent last week after the Internet leader reported strong results and swore off any economic weakness in its business, but analysts see little chance of a similar reaction for Yahoo. "Maybe Yahoo won't miss their quarter. They can't say anything bullish that people will believe," Pyykkonen said.[15]
A three week deadline was set by Microsoft for the internet search firm Yahoo to agree to the takeover.[40] Yahoo! could be facing a proxy fight after letting Microsoft's takeover deadline pass quietly this weekend.[19]
Keep in mind that Microsoft could do all three, and in any order. One path that Microsoft could take, for example, assuming that Yahoo doesn't call an annual shareholder meeting in the interim, would be to withdraw its offer for a month or two, and let Yahoo's stock give up some ground. It may not make sense for Microsoft to roll out its proxy slate until it gets closer to forcing Yahoo to hold a shareholder meeting.[18] Due to a drop in Microsoft stock, it is now worth US$42.7 billion. Another three Wall St houses see Microsoft walking away rather than raising its offer. Many Microsoft shareholders fear a higher-priced deal would dilute the value of their shares.[2] If Microsoft presses ahead with the deal it must consider if it should hold firm on the price or offer a better deal to win over shareholders. The company has spent billions creating a web search engine and technology to sell ads, and buying Internet companies such as AQuantive.[8]
Impatient with the speed of negotiations, Microsoft had given Yahoo's board three weeks to agree to its blockbuster acquisition offer, initially valued at $44.6 billion, or face the consequences.[23] Microsoft made it clear after the deadline it had set, that it may consider the next move at the beginning of next month. Yahoos board members who seemed to be the next target for Microsoft in its pursuit for the take-over bid made their stand clear saying they wont sell to Microsoft for less than $45 billion.[36] With Saturday's deadline passed, Wall Street and the tech industry are awaiting Microsoft's next move in its Yahoo bid. As of early Monday morning, there was no word from the company on its plans. The evolution of its public statements provides some clues about what has been happening behind the scenes.[42] Stanford Group analyst Clayton Moran weighs Microsoft's alternatives. With Yahoo employing "hard-ball" negotiating tactics, we believe Microsoft may publically drop its bid to acquire the company.[43] Microsoft may appear desperate for Yahoo but the reality is that it could and arguably should walk away and be fine. Why? Microsoft has more alternatives at its disposal. With the Yahoo bid, Microsoft is going for a big bang but you can accomplish the same goal with a bunch of tuck-in acquisitions.[43] Dinosaur Research analyst David Garrity estimates that were Microsoft to walk away, Yahoo's stock could drop around 14 per cent.[2]
"Microsoft does need Yahoo," Shah, a merger arbitrage analyst, said in an interview with Bloomberg Television. "If they didn't, they would have walked away a long time ago." Microsoft rose to the equivalent of $30.03 in German trading yesterday, from the close of $29.83 in Nasdaq trading on Friday, the day after reporting that sales of its Windows personal computer software missed analyst estimates.[6] Yahoo stock prices closed down 1.86 percent at $26.80 in trading Friday on the Nasdaq. Microsoft officials said they would consider only a modest increase.[35] Outcome: Yahoo's stock was at a four-year low of $19.05 before Microsoft's offer. It immediately jumped into the high $20s.[13] By the time Yahoo's board formally rejected the unsolicited offer on Feb. 11, saying it undervalued the company, Yahoo's stock price had risen to $29.87, erasing the offer's premium.[25] Because of falling stock prices, the value of the offer dropped to about $42 billion. Yahoo says it's worth more.[44]
The makeover's timing hasn't been determined, but it will happen before the end of the year, Balogh said. It could still be derailed if Yahoo is taken over by Microsoft Corp, which has offered to buy its rival for more than $44 billion in cash and stock.[45] I remember reading Ballmer made a statement while travelling that Microsoft was moving ahead with their business with or without Yahoo. He said something of the sort that if the deal works out fine, if not Microsoft moves forward. He also said that Microsoft is going to buy something like 5 businesses per year priced up to $1 billion for the next 5 years.[30] If no deal is reached by Saturday, the options are "to try to facilitate a transition, to possibly go directly to Yahoo shareholders. That's clearly much squishier than Ballmer's earlier declaration to Yahoo that, without a deal, Microsoft "will be compelled to take our case directly to your shareholders."[42] "I know that at least 10 of my work friends have the same plan. It is our escape plan if something in the valley doesn't look more interesting first. "Therefore, we like the deal." There's been lots of back and forth about Microsoft and Ballmer being at risk of "losing face" if Microsoft gives up on its Yahoo acquisition plan.[17]
The analysis is based on input from "expert corporate attorneys -- Michael Sullivan and Ed Deibert at Howard Rice Nemerovski Canady Falk and Rabkin in San Francisco". A third option would be for Ballmer to increase the size of Microsoft's offer, which would enable Yahoo's current board to accept while saving face. Since Microsoft is already offering more than anybody outside Yahoo thinks it's worth, this may not be likely, but it's certainly possible.[28] The deadline for Yahoo! to accept Microsoft's buyout offer expired last Saturday without a word from either company.[16] As of early April, Ballmer had participated in at least two meetings with Yahoo, according to a letter that Yang sent to Microsoft to reiterate the company's demand for a higher offer.[12]
Microsoft CEO Steve Ballmer has plenty of options of what to do next in his brewing battle for Yahoo, but experts and sources within the company are telling me he'll go hostile.[46] Time Warner is happy to unload AOL and wouldn't give CEO Steve Ballmer nearly as much grief as Yahoo chief Jerry Yang has. With AOL, Microsoft would enhance its revenue, search and ad inventory.[43] A chasm has developed since Microsoft CEO Steve Ballmer lashed out at Yahoo's board in an April 5 letter.[26]
Some analysts argue Microsoft's pressure tactics could backfire and spoil hope of Yahoo's board agreeing to a deal.[15] Industry watchers say the last option makes the most sense. Microsoft (nasdaq: MSFT - news - people ) likely would replace Yahoo!'s board with a board of its choosing that would dissolve Yahoo!'s poison pill anti-takeover clause and approve the deal.[16]
Word on the street suggests that Microsoft has a formidable slate of new board candidates, including former Adelphia Communications (other-otc: ADLNQ.PK - news - people ) Chief Financial Officer Vanessa Whittman; Jaynie Studenmund, former chief operating officer of keyword advertising specialist Overture Services (now part of Yahoo!); former Grey Global Group head Edward Meyer; and former Nextel Partners chief John Chapple. Yahoo! has 10 executives on its current board.[16]
SAN FRANCISCO, California (AP) -- The top executives at Microsoft and Yahoo have not held any recent discussions to break an impasse that threatens to turn Microsoft's 3-month-old takeover bid into a slugfest.[26] Not so much with Microsoft's three-month quest to buy Yahoo. The two technology giants have tussled publicly since Microsoft announced its takeover proposal Feb. 1. They've exchanged carefully worded statements and spread details of their negotiations and prospects through the media in a bid to gain the upper hand and sway investor opinion.[13]
There's reason to believe it could take a similar fall without Microsoft's acquisition proposal, though Yahoo's management has argued that Microsoft's bid undervalues the company in light of a new growth strategy. Investors belief in that strategy would be tested by this scenario.[13] Outcome: If the bid was bumped up a few bucks, it could juice Yahoo's stock, send Microsoft's shares down a bit and just might put the acquisition on a fast track.[13]
Microsoft has given Yahoo until the deadline expires to reach an amicable agreement or face a hostile bid at a reduced price.[40] Microsoft has urged Yahoo to accept a deal rather than embark on what could turn out to be a prolonged and bitter bid battle.[32] Very few deals are closed without negotiation, and it seems absurd of Microsoft to assume that Yahoo would happily accept the offer and that the two companies would live happily ever after.[14] Cutting the deal's price would lead to a protracted battle. He sees Microsoft sweetening its bid with an all-cash $31 offer.[15]
Andy Miedler, an analyst with Edward Jones, said that while the Microsoft Yahoo deal made strategic sense, from a financial perspective, "we're cautious". "We already think they're paying a high price," he said.[32]
SAN FRANCISCO -- Investors and analysts are now waiting for Microsoft MSFT to drop the other shoe. The company had indicated last Thursday that it would disclose early this week its next move in pursuit of a merger with Yahoo! YHOO.[41] Now that the deadline has expired, the consequences are unclear. Microsoft has vowed to disclose its strategy sometime this week in a move that promises to intensify the drama in this corporate chess match. To demonstrate its resolve, Microsoft executives have mentioned several options at their disposal - all of which pose hazards to Yahoo.[23] Microsoft CFO Christopher Liddell hinted on Thursday and in a broadcast to employees Friday the software giant will respond "next week," which happens to be now. All the incremental data on the Microhoo saga can be found on Techmeme, but the real question is this: Who has all the leverage? Despite Yahoo's bluster, it appears Microsoft still holds all of the cards. Microsoft controls its market cap and Yahoo's.[43]
The software giant, which has been officially pursuing the struggling Internet portal for nearly three months, has several options. It can call it quits. It can sweeten its offer in hopes that Yahoo! (nasdaq: YHOO - news - people ) will agree to a friendly merger. It can take its proposal directly to Yahoo! shareholders. Or it can launch a proxy fight to replace Yahoo!'s board.[16] Microsoft was, presumably, preparing proxy materials to send out to Yahoo shareholders, in an effort to take over the board.[14] Negotiate now and it has the chance of becoming the best arrangement possible for shareholders. Wait for Microsoft to run its own board, and control all the cards, and Yahoo risks losing everything.[46]
Microsoft reported an 11% fall in quarterly profits. Microsoft can either now withdraw its offer or go directly to Yahoo's shareholders, which is seen as the most likely outcome.[32] The deadline for Microsoft's offer to acquire Yahoo expired over the weekend.[44]
You want The Business Press Maven's speculative take? I say Yahoo! did not wish to lose face by crumbling at Microsoft's deadline. Yahoo! knew that Microsoft's light earnings put pressure on them and that no one wants a fight.[1] Take it from The Business Press Maven: Nothing to report and a lot of time to report it in is a dangerous combination. This is what we are faced with, after Yahoo! YHOO let a Microsoft MSFT deadline to agree to its merger terms expire without action or comment on Saturday.[1]
Yahoo! said that it believed that the ball was in Microsoft's court. It is continuing to talk to Time Warner and News Corporation, parent company of The Times, about a potential rescue.[11] To avoid Microsoft's clutches, Yahoo has sought a strategic tie-up with a "white knight," reportedly examining possible alliances with social networking website MySpace, owned by Rupert Murdoch's News Corp., and with Time Warner's faded Internet star America Online.[3] To avoid the takeover, Yahoo has sought a strategic tie-up with a "white knight," reportedly seeing possible alliances with MySpace, owned by Rupert Murdoch's News Corp., and with Time Warner's faded Internet star America Online. Yahoo has even partnered with Google for its AdSense search service, which will deliver relevant Google ads alongside Yahoo's own search results.[4]
Although Microsoft's profits fell 11% to $4.39bn ('2.22bn) in the three months to 31 March from $4.93bn a year earlier, the results were in line with expectations. Microsoft's online services saw a 40% rise in sales to $843m in the quarter, but its online sales still fall far behind Google. Buying Yahoo would give Microsoft a big boost in its battle with market leader Google for pre-eminence on the online search market.[32] Acquiring Yahoo would give Microsoft the number two spot in the $41 billion online ad market.[8] Microsoft has offered to buy it for $45 billion dollars, but Yahoo says it is worth more than that. This weekend the biggest takeover battle the technology world has seen should reach boiling point.[40] The next day, Microsoft hinted in a letter to Yahoo that it wouldn't shy away from attempting a hostile takeover.[25] I did think that your boss Charles Arthur's analysis on 'Newnight', when the takeover was first tabled, was the most interesting and penetrating that I'd heard from anyone who writes for these pages. Basically (if he'll forgive my brief and probably clumsy summation), that a Microsoft takeover of Yahoo! might be good for consumers because Microsoft would be so disabled in the process of trying to digest and incorporate Yahoo! that competitors would gain on it and its already-under-threat monopolies disintegrate.[28]
If Microsoft did "walk," and snap up open-market shares in the aftermath, it would trigger Yahoo's poison pill, adopted in 2001. That'd be the key reason why Microsoft wants to replace Yahoo's board with members of its own choosing.[46] Yahoo's board of directors has said the offer "substantially undervalues" the California firm, insisting the company is worth at least 40 dollars a share.[3] Yahoo! directors say the offer is too low and suggested a price closer to $35 a share.[35]
I suspect the rest of us don't think that buying Yahoo would make any difference in the long run. It would create a more competitive landscape for web advertising in the short term, but sooner or later, Google is going to get an 80- 90% market share, or thereabouts. That's what happens in IT. Anybody who hasn't recognised that phenomenon is an idiot. Microsoft has managed to overturn 80-90% market shares before -- CP/M, Lotus 1-2-3, WordPerfect, Netscape, Palm, PlayStation etc -- but usually the companies involved have helped with their own downfall.[28] Microsoft isn't competing with anyone else for Yahoo. A brief trial of Google's advertising in Yahoo's search results already has antitrust regulators in Washington stirring from their repose.[30]
Yahoo maintains that Microsoft's offer "substantially undervalues" the search engine giant.[34] Yahoo has continued to insist that Microsoft's offer "substantially undervalues" it.[7]
Most analysts believe that, after all the machinations, Microsoft will ultimately acquire Yahoo. Although Yahoo is trying to conjure up alternatives, they say, the reality is that it doesn't have many. Derek Brown, an analyst with Cantor Fitzgerald, said, "Yahoo doesn't seem to have a whole lot of options that are as good as or better than what Microsoft seems to have put in front of them right now."[23] Cowen analyst James Friedland says Microsoft's deadline was just another part of the negotiating process. "This is a game of chicken," he says. "To its credit, Yahoo! is hanging in tough, but their alternatives are not very attractive."[41]
Microsofts plan of buying Yahoo is still in suspense after the deadline of Saturday that the software maker had made for Yahoo, passed without the Internet giant accepting the take-over.[36] Responding to a question Monday, Smith said no meetings have been scheduled among executives at Microsoft and Internet pioneer Yahoo.[26] Microsoft may still see no reason to give Yahoo more money, with no competing bids out there.[30] Fox Interactive: News Corp. and Microsoft reportedly have tinkered with a joint venture to bid for Yahoo.[43] Since the bid's announcement, Yahoo CEO and co-founder Jerry Yang has held conversations with various companies including Google, AOL, Disney and News Corp., exploring alternative deals that would strengthen Yahoo's business and relieve the pressure on it to be acquired.[25] No alternative deal has materialized for Yahoo, except for a very limited, albeit eyebrow-raising, test that saw Yahoo run Google ads along with some search engine results on Yahoo.com.[25]
Yahoo failed to agree to an acquisition deal with Microsoft by Saturday, the deadline Microsoft had set for wrapping up negotiations.[25] If Microsoft remains determined to do a deal it may be able to pick up Yahoo for less by waiting a few months.[24] Some Microsoft folks are counting on moving to Yahoo if the deal is consumated.[17]
Of course, no one wants to be on the record opposing a deal championed by Microsoft CEO Steve Ballmer, Platforms & Services Chief Kevin Johnson and Chief Financial Officer Chris Liddell; that would be career suicide.[17] Microsoft CEO Steve Ballmer and CFO Chris Liddell softened that stance in public comments last week, saying that giving up on the acquisition would also be an option.[25]
Some of the company's resellers think Microsoft's own "Vista bashing" is the most painful of it all. These businesses want top officials to stop it already. In the past month, Microsoft CEO Steve Ballmer has referred to Vista as "a work in progress" and hinted that Microsoft might extend the June 30 deadline for Windows XP. Earlier this month at the RSA conference in San Francisco, David Cross, a product unit manager at Microsoft, said the User Account Control feature in Vista was designed "to annoy users." Many of Microsoft's channel feel they have been working hard to move people beyond their dislike for the product and are not helped by Microsoft's own admissions. Of course, not all resellers feel this way.[47]
It shouldn't necessarily have to. There's a thought going around on the Street that Steve Ballmer will announce he's walking from the deal all together, a scorched Earth strategy that would nuke Yahoo shares. After they're crushed into the low teens, Ballmer's clan can start snapping up shares on the open market for half what they're worth today. I wrote about this Friday, and some on the Street dismiss the idea since it would lead to enormous bad blood.[46]
"The idea we should increase our bid just because we can afford to is not one that I favor. Unless we make progress with the Yahoo board by this weekend, we will explore our alternatives." Liddell's comments echo those made by Ballmer earlier in the week.[3] Keller said that's unlikely a long-term concern for Microsoft. There could be "short-term defections, a lot of blood shed in the media," he said. Ballmer and Liddell made clear this week that they were prepared to drop the bid. It could be posturing; there's been no shortage of that.[13] Last week : In comments to investors and then employees, Microsoft finance chief Chris Liddell says explicitly for the first time that another of the company's options is to abandon the bid entirely.[42] Executives at several Microsoft divisions oppose the bid on grounds it will divert needed resources and attention from other challenges the company faces, said people familiar with the company. That sentiment is heightened as Microsoft heads into its annual budgeting season, said people familiar with the company. It remains to be seen if that internal dissent is enough to make Ballmer drop the whole thing. Whatever happens, this promises to be an interesting week.[42]
Here's what Liddell said on the subject Thursday: "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." He called the initial offer "extremely generous" and Microsoft has "yet to see tangible evidence that our bid substantially undervalues the company.[13]
The value of the bid, originally $31 in cash and stock, has dropped to $29.68. Microsoft has spent billions creating a Web search engine and technology to sell ads, and buying internet firms such as AQuantive.[6] Three months ago Microsoft offered $45 billion for the San Francisco Internet company.[44] Losses at Redmond, Washington-based Microsoft's Internet business widened to $228 million last quarter, and sales rose to $843 million, at the low end of company forecasts.[29]
Microsoft shares fell more than 6%, or $1.97, to $29.82 Friday after the world's largest software maker reported a 24% drop in sales of Windows last quarter and forecast earnings that may miss analysts' estimates.[21] Driven by Wall Street's disappointment with the company's short-term outlook, Microsoft shares dropped $1.97 to $29.83 on Friday.[20]
With Yahoo's latest earnings reports showing disappointing results the company's stock is liable to drop precipitously if Microsoft withdraws.[24] What two things empower every company? That's easy: customers and employees. Somehow Microsoft seems to be forgetting that as it grows more aggressive in its plans to take over Yahoo.[39]
According to an analyst cited by Bloomberg.com, Microsoft needs Yahoo. "If they didn't, they would have walked away a long time ago," said analyst Sachin Shah.[30] Yahoo has impressed many analysts by managing to cobble together a scenario where it might just drive off much-feared Microsoft.[15]
Maintaining that Microsoft's bid is insufficient, Yahoo has been implementing a long-promised turnaround strategy designed to boost revenue growth after more than two years of financial lethargy.[45] Yahoos first quarter revenue increased by 9 percent but less than Googles and Microsofts online services division, which increased by 42 and 40 percent, respectively.[36] Are Softies fighting the Yahoo merger because they fear they might lose their jobs? Doubtful, as there are many open slots in Microsoft's online services business right now. If anyone is at risk of being cut, it's more likely the Yahoos. That said, not everyone at Microsoft is anti-MicroHoo.[17]
"With respect to Yahoo we have been clear speed is of the essence," Microsoft chief finance officer Chris Liddell said on Thursday.[32] Microsoft chief financial officer Chris Liddell said Thursday that the U.S. software giant is standing by the April 26 deadline.[3]
Microsoft is a search engine on the side and has plenty of revenue from software products. It's not like Yahoo is a great search engine with great trafficthey do have a very strong brand though. [27] Best case for Microsoft: An ad slowdown that crushes Yahoo and makes $31 look like the best option on the planet. Odds and ends : Remember Capital World Investors? Earlier this month the investment firm reported that it had doubled down on Yahoo in a bet that indicated that the Microsoft purchase was a lock.[9] Experts believe Microsoft may now seek to gain ground by trying to get supportive voices onto Yahoo's board.[8] Yahoo's board is reportedly meeting Sundayyou'd think the company would have met before the deadline, but I guess we're all prone to procrastination.[43]
Microsoft's Saturday "negotiate or else" deadline for Yahoo has passed with an eerie silence.[43] Microsoft has given no indication that raising the price is in the cards. It was unmoved to do so by the better-than-expected first-quarter earnings Yahoo reported on Tuesday.[13] As a deafening silence emanates from Sunnyvale and Redmond, the media speculation began to build on how Microsoft Corp would respond to the reluctance of Yahoo Inc to become part of the software-maker'''s empire. At this point, the media'''s consensus is that there exists no direct contact between the two sides. "There was no direct contact between the two sides this past weekend and people close to both camps said they were preparing for the next stage of battle.[38]
Perhaps the time for a strategic withdrawal has come in the battle of Microsoft Corp. (NASDAQ: MSFT ) vs Yahoo Inc. (NASDAQ: YHOO ).[38] Microsoft fell 84 cents, or 2.8 percent, to $28.99 at 4 p.m. New York time in Nasdaq Stock Market trading.[29] Yahoo!'s stock was up 13 cents, or 0.5%, to $26.93 in recent trading.[41]
A proxy war may be Microsoft's only alternative given Yahoo isn't going to budge. [9] Microsoft has also assembled an alternative board it could try to have elected in a proxy battle, but it is far from clear whether it has the votes to succeed. "It's not clear if they would be successful," Steve Weinstein, an analyst with Pacific Crest Securities told Forbes magazine. "It's a possibility, but not a certainty."[24]
The possibilities are discussed in If Microsoft goes fully hostile on Yahoo, on Marc Andreessen's blog. [28] Add it up and Microsoft could win a hostile takeover in just a few short months.[9] Potential hostile acquirors assumed that hostile takeovers wouldn't work because the target company's employees would bail and the target company's business would collapse. It turns out that as technology companies become larger and more mature, acquirors are becoming increasingly convinced that neither of these assumptions hold.[31] If large mergers and acquisitions can prove distracting, how about large hostile takeovers? Andreessen is correct, in that there are really no templates for big hostile takeovers in technology. Those who can recall the hotly contested Hewlett-Packard-Compaq merger earlier this decade might also recall how steep a price HP paid in just distractions alone.[31] Hostile takeover bids often prompt an exodus of workers and make hiring difficult.[23] Here's Citigroup analyst Mark Mahaney's cribsheet. Is a fully hostile takeover really that simple? Going hostile would be ugly for both parties. It's a distraction.[9]
The takeover drama between the technology titans enters a new phase with all eyes set on what Microsoft Corp's next move would be. [15] Microsoft walking away and meaning it would be another good tactic, since Microsoft's senior managers appear to be the only people who actually want a takeover.[28]
CNET News.com readers who participated in our poll regarding Microsoft's options are largely betting that it will "walk away" from the acquisition bid, with 44.8 percent of the votes.[18]
Sources at Microsoft indicate that the deadline may well pass without immediate action. Looming in the background is Google with its huge share of the online advertising market.[40] Microsoft is eager to merge the two companies' resources to take on Google, which dominates the lucrative Internet search advertising market which is expected to grow to 80 billion dollars annually worldwide in the next two years.[3] A long-term advertising partnership with Google probably would provide a significant boost to Yahoo's profits, but antitrust concerns might block an alliance between the owners of the Internet's two largest search engines.[20] Google and Yahoo are leading the Internet search market with more than 80 percent of the U.S. market. This article is copyrighted by International Business Times.[36] The more open platform copies a concept that already has been embraced by Internet search leader Google Inc and a variety of online social hangouts, including Facebook Inc and News Corp's MySpace.com. Yahoo's new look will give its roughly 500 million users greater flexibility to customize Web pages. They will be able to pick from a variety of mini-applications, known as "widgets," and plant them just about anywhere on the site, including their personal version of the front page. Hoping to capitalize on the social networking craze, Yahoo also is making it easier to connect with friends and family through its Web site. It will highlight messages from e-mail users' most frequent connections let them track the activities and opinions of online buddies.[45] Yahoo even tested letting Google handle placing online advertising on Yahoo's own search pages to determine whether it generates more money than Yahoo's new Panama online ad platform.[3]
Yahoo also added video to Flickr and joined Google's OpenSocial project of common APIs for social networking applications. Last week, it announced its most ambitious plan yet to take advantage of the popularity of social networking. Yahoo Open Strategy calls for the company to swing wide open the doors of its Web platforms to let outside developers create applications across its network of sites, starting with its search engine via a beta project called Search Monkey.[25] Observers speculated that the test, announced on April 9, could lead to a full-blown outsourcing of Yahoo's search ad business to Google, a move that financial analysts believe could boost Yahoo's revenue.[25] The two sides just completed a two-week trial that allowed Google to show text-based advertising along a small percentage of Yahoo's search results.[20] Combined, Google and Yahoo control more than 80 percent of the U.S. search market.[20]
Well paying over 40 Billion for a second place player (a distant second) and having to get into a proxy fight to do it. I think MS would be better served plowing that 40 Billion into the next wave of technology rather then buying yesterday's also ran especially if they don't want to be bought. The cry that YAHOO is worth more is silly, this isn't 1999 and they are not GOOGLE.[14] There is a good chance that Microsoft views a proxy fight as long, costly and potentially harmful to business.[43]
At the earliest point, it could head to the Delaware Chancery Court to make the request Jul. 13. In the meantime, between withdrawing its offer and announcing its proxy slate, Microsoft may want to announce a tender offer, giving investors a real piece of meat to put on their plate and, hence, a reason to vote in Microsoft's opposition slate. This article was originally a blog post on CNET News.com.[18]
Yahoo said last week it remained open to a merger, but the current offer "substantially undervalues" the company.[2] Ballmer also warned that any further delays could result in a less attractive offer for Yahoo.[3]
"Our bid is quite generous, roughly 80 times earnings," Ballmer said. "If we don't hear from Yahoo!, we've said we'll go to their shareholders."[35] About 20 to 25 per cent of Yahoo! shares are estimated to be in the hands of short-term arbitrageurs, which are likely to be in favour of a bid. Jerry Yang and David Filo, the founders, neither of whom is keen on the bid, hold 10 per cent between them.[11] Yahoo's share price would probably crash, shareholders would beat up Yahoo's management, and more of the remaining talent would leave.[28] Shareholders would vote on the new board at Yahoo!'s next annual meeting.[16] Shareholders will vote on who will sit on the company's board. The pieces of this puzzle must be in place. Microsoft needs to take these steps so that it's ready to take the next ones.[46] "I think that for the time being, Microsoft will step back, let the dust settle and watch the fur fly between shareholders and management," said David Garrity, director of research for Dinosaur Securities.[23]
The internet giant also had plans of merging with the online operators of Time Warners AOL as one of the alternatives to Microsofts take-over.[36] SAN FRANCISCO: Yahoo Inc plans to make its Web site a social hub by hosting applications from other online services, part of the Internet pioneer's effort to spawn more advertising opportunities.[45] Acquiring Yahoo would give it second spot in the $41 billion online ad market.[6] Yahoo! shares closed 37 cents down yesterday at $26.43 amid fears that the impasse will not be broken soon.[11] One thing that would be interesting to look at is the relavtive share of the Google, Yahoo & MSN in Asia.[28]
The most concrete was on Feb. 12 when Yahoo, as it had been planning to do, started laying off about 1,000 staffers, and prominent executives like Bradley Horowitz, vice president of product strategy, voluntarily gave up on the company and left, in Horowitz's case to arch-rival Google.[25] Quietly the Microsoft juggernaut slows down. Firefox grows at a creditable and sustainable speed; EePC brings Linux to the high street and the iPod, iPhone and iTouch are giving Apple a new credibility with consumers who are buying their kit. Somehow the anger we used to vent on Microsoft is fading as it becomes just another computer company which still charges too much for its products. Google on the other hand does what it always did well, give the consumer top quality stuff and not charge them a penny.[28]
Microsoft's top lawyer, Brad Smith, says no meetings have been scheduled between executives. He declined to comment on the company's next move.[44] Wilderotter formerly spent a couple of years as an executive at Microsoft (see "Faces Behind The Deal" ).[16] Microsoft did complete a search-related deal before heading out for the weekend. They finalized the acquisition of Fast Search & Transfer. That firm's CEO, John Markus Lervik, becomes Microsoft'''s corporate vice president of enterprise search, Microsoft said in a statement.[30] We've thought the Fast deal presented a lot more to Microsoft than just search. Fast has technology in a variety of areas, including surveillance and enforcement. We speculated in January on this.[30]
We've been disappointed in the speed at which the transaction went." He said Microsoft had publicly signaled what its alternatives were if the two companies failed to reach a deal by the weekend.[10]
Friedland says if the deal collapses, Yahoo!'s price will likely plummet.[41]
In addition to Yahoo! founder, Jerry Yang, the board consists of Roy Bostock (Yahoo!'s chairman), ber-investor Ron Burkle, Softbank Capital partner Eric Hippeau, American Media Chairman Arthur Kern, Hewlett-Packard (nyse: HPQ - news - people ) Executive Vice President Vyomesh Joshi, Activision (nasdaq: ATVI - news - people ) Chairman Robert Kotick, Northwest Airlines (nyse: NWA - news - people ) Chairman Emeritus Gary Wilson, Skyrider Chairman Ed Kozel and Citizens Communications (nyse: CZN - news - people ) CEO Maggie Wilderotter.[16] The pace of the last two months has been anything but speedy," Ballmer wrote in a letter sent to Yahoo's board on April 5.[14] The public remarks of Ballmer and Liddell could be just part of a negotiating ploy aimed at pressuring Yahoo to the negotiating table.[20]
"And our alternatives then, are to try to facilitate a transition, to possibly go directly to Yahoo shareholders. We'll see what next week brings," he added. [10] Last week, Yahoo reported 2008 first quarter earnings that were considered solid, although not stellar, and that Yang said prove the company is in the rebound. Yahoo grew its revenue and net income and exceeded Wall Street's expectations for both categories.[25] Yahoo rose to the equivalent of $26.99 in Germany, from the U.S. close of $26.80 last week.[6]
If I were Microsoft, I'd be using a good part of that $40-odd billion to hire a SWAT team to help Windows Vista. [17] Microsoft doesn't have to win 50.1 percent of total shares just 50.1 percent of the shares that are voting.[9] The world's biggest software company reported earnings of 47 cents per share -- topping financial analysts' predictions by two cents but lower than the 50 cents per share, or 4.93 billion dollars, posted in the same quarter a year earlier.[3]
All anti-virus vedors release faulty updates at one point or another but Microsoft takes the cake. An update it released for its Windows Live OneCare antivirus suite mistakenly identified the popular VOIP (Voice Over Internet Protocol) software Skype as a trojan.[39] According to Brad Smith, software maker Microsoft's general counsel, not even a key weekend deadline brought the two sides together.[26]
The substantial premium reflected in our initial proposal anticipated a friendly transaction with you. According to reports, Microsoft is expected to make a decision on its next step this week.[34] The change suggests that Microsoft executives have been giving more consideration to the possibility of walking away.[42] Google handled six times more queries in the U.S. in March than Microsoft, according to ComScore Inc., a Reston, Virginia-based researcher.[29] Google handled six times more queries in the U.S. last month than Microsoft, according to research firm ComScore.[6]
Yahoo currently has an advertising partnership with Google which is forecasted to increase Yahoos profits. [36] Yahoo management has expressed confidence in a turnaround plan that projects revenue increases of 25 percent in 2009 and 2010. Analyst estimates for those years have remained substantially below those targets — a sign of the widespread skepticism about whether Yahoo will be able to reach its ambitious goals.[20] "Yahoo management would be under inordinate pressure to accept at that point," said Dinosaur Securities analyst David Garrity.[20]
Yahoo co-founder David Filo speaks during the launch of the "Greenest City in America" challenge at a press conference in New York's Times Square district on May 14, 2007.[35] Giving Yahoo some time to fully digest the reality of what it is facing might be a worthwhile strategy. To force the matter any further right now may only lead to the degradation of the reputations of both companies. That is something that no one desires.[38]
Ballmer called the offer "quite generous'' three days ago. "By this point if they don't agree we would have to take our arguments directly to the shareholders,'' he said after a speech to business executives in Madrid. "We will see what they do, and we will move appropriately at that point.'' [29] A close 39 percent are betting on a proxy fight, and 16.2 percent say a tender offer is likely.[18]
Google, the owner of the most used internet search engine, had $3.7 billion in revenue, excluding sales passed on to partner sites. [6] I have a feeling that Yahooo is much bigger than either in S. Korea, and that Google isn't too strong in China (now the biggest internet audience in the world). I'm still not sure it would make this deal a good one, but do think that a lot of us look at Google's share in the Western world and assume that it's the same everywhere else. Offensive? Unsuitable? Report this comment.[28]
Much of the stock is held by arbitragers who would accept $31, said Walter Price, a portfolio manager at RCM Capital Management in San Francisco. [29]
SOURCES
1. No One Can Call the Odds on Microsoft-Yahoo! | Media | BEAS MSFT ORCL YHOO - TheStreet.com
2. Yahoo bid 'to turn hostile' - 29 Apr 2008 - NZ Herald: New Zealand Business, Markets, Currency and Personal Finance News
3. AFP: Microsoft takeover deadline for Yahoo expires without comment
4. Hostile takeover looms as Yahoo ignores Microsoft's ultimatum
5. ArabianBusiness.com Mobile
6. Business Report - The Yahoo ball is in Ballmer's court
7. Moneyweb - Wall Street Journal - Microsoft confronts tough choice on Yahoo
8. ireland.com - Breaking News - Microsoft deadline for Yahoo expires
9. Microsoft: Does a Yahoo proxy war add up? | Between the Lines | ZDNet.com
10. The Hindu News Update Service
11. Steve Ballmer ready to demand date from Yahoo! - Times Online
12. The Associated Press: Microsoft, Yahoo aren't talking as investors await next move
13. Microsoft | Time's up for Yahoo; what will Microsoft do next? | Seattle Times Newspaper
14. Where's the Fire? Microsoft Takes Its Sweet Time With Yahoo | Epicenter from Wired.com
15. For Yahoo, clock ticks down to Microsoft deadline- Hindustan Times
16. Microsoft's Hostile Play - Forbes.com
17. Another reason Microsoft should give up on Yahoo: Morale | All about Microsoft | ZDNet.com
18. Yahoo, Microsoft shares sag, post-deadline : News : Business - ZDNet Asia
19. Yahoo! faces proxy fight - Epiphany Search Industry News
20. The Associated Press: Microsoft in quandary over Yahoo bid as key deadline passes
21. Microsoft holding strong on Yahoo bid
22. MediaFile » Blog Archive » What will Microsoft do about Yahoo? | Blogs | Reuters.com
23. Yahoo mum as Microsoft merger deadline passes
24. Yahoo stays silent as Microsoft deadline nears- Internet -Infotech-The Economic Times
25. ABC News: Microsoft-Yahoo Deadline Passes; No Deal
26. Microsoft, Yahoo fail to resolve bid impasse - CNN.com
27. Who's Bluffing? Microsoft or Yahoo?
28. Microsoft v Yahoo -- a big week ahead? | Technology | Guardian Unlimited
29. Bloomberg.com: Worldwide
30. Yahoo Deadline Passes, Internet Awaits Microsoft Move | WebProNews
31. Microsoft and Yahoo: The Standoff Continues (For Now) - The Chart - IT Channel News And Views by CRN and VARBusiness
32. BBC NEWS | Business | No move as Yahoo deadline expires
33. Microsoft bid for Yahoo expires - International Business Times -
34. World Screen - Home
35. Microsoft may get hostile with Yahoo - UPI.com
36. Microsoft-Yahoo Deal Uncertain After Key Deadline Passes - International Business Times -
37. Microsoft Slides 2%; Yahoo's Deadline To Make Decision on Bid Passes
38. Microsoft vs Yahoo!: Knowing when to back off - BloggingStocks
39. TECH.BLORGE.com
40. Microsoft deadline looms for Yahoo - ABC News (Australian Broadcasting Corporation)
41. Microsoft, Yahoo! Keep Playing Chicken | Technology Update | GOOG MSFT TWX YHOO - TheStreet.com
42. After so much Yahoo, will Microsoft walk away?
43. Microsoft: Pondering the alternatives to Yahoo | Between the Lines | ZDNet.com
44. Local News | Microsoft, Yahoo plot next move in takeover battle | Seattle Times Newspaper
45. Yahoo to get social hub makeover- Internet -Infotech-The Economic Times
46. Microsoft Left With "Hostility" In Yahoo Bid? - Tech Check with Jim Goldman - MSNBC.com
47. Does Microsoft itself engage in Vista bashing? | NetworkWorld.com Community
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