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Finally, Microsoft and Yahoo in Merger Talks

May 2, 2008


After a months-long standoff, Microsoft and Yahoo are in active merger talks, a person involved in the discussions said.

Microsoft, which had threatened to abandon its bid, has increased its offer “by several dollars,” this person said. The merger talks represent an enormous breakthrough following weeks of behind-the-scenes discussions without any progress. Exact terms being discussed could not be learned.

The talks would explain the silence from Microsoft this week as it has refused to disclose its plans, despite threatening to bring a proxy contest if Yahoo didn’t reach a deal with it by last Saturday. Seven days have passed without any announcement from Microsoft about how it intends to proceed.

Still, a person involved in the talks cautioned that they could still be postponed or collapse entirely.

Shares of Yahoo rallied on news of the renewed talks. They were trading at about $28.54 in mid-afternoon, up more than $1.70, or nearly 6.5 percent. Microsoft shares were down more than 1.5 percent.

Meanwhile, some Yahoo shareholders say that they have received a flurry of phone calls from both Yahoo and Microsoft, as the two companies are trying to find out what price large shareholders would find acceptable.

Microsoft has privately raised the possibility of upping its offer, currently valued at about $29.30, to as much as $33 a share in recent days. Some shareholders have signaled they are holding out for more than $35. One shareholder said he believed an offer of $34 would probably be sufficient to consummate a deal.

Microsoft and Yahoo declined to comment.


Source: New York Times

Microsoft Walks, But Some See Just Another Negotiating Ploy

May 03, 2008


SAN FRANSICO -(Dow Jones)- Yahoo Inc. (YHOO) claimed victory late Saturday after Microsoft Corp. (MSFT) said it was walking away from its unsolicited takeover attempt for the struggling Internet giant, but some observers said the battle for control of Yahoo may not necessarily be over.

Microsoft said earlier Saturday that it was walking away from its $31 per share offer, which initially valued Yahoo at $44.6 billion, because it was unable to reach an agreement with Yahoo over price. Microsoft noted that it had been willing to raise its bid by about $5 billion.

"We don't think its over. It's clear that Microsoft needs Yahoo and there is going to be outrageous pressure on Yahoo management from shareholders," said Gene Munster, analyst at Piper Jaffray.

That's because Yahoo shares were seen to open Monday at about $21, down from Friday's close of $28.67, analysts and arbitrageurs said. Investors unhappy about Yahoo's prospects had driven the company's shares down to $19.18 the day before Microsoft announced its $31 per share offer.

Analysts and arbitrageurs said Yahoo shares wouldn't likely fall to the $19 range because some shareholders would be betting that Microsoft was merely trying to ratchet up the pressure on Yahoo. Several shareholders have already sued Yahoo for rejecting Microsoft's bid.

Microsoft's decision to walk away recalls a similar move by software maker Oracle Corp. (ORCL) last year in its attempt to win control of BEA Systems Inc. After BEA turned down Oracle's offer, Oracle withdrew its bid and went to great lengths to highlight the effort it made to reach a deal with BEA. Pressure from shareholders ultimately forced BEA management to agree to a deal with Oracle.

But Yahoo Chairman Roy Bostock appeared to downplay the potential for a shareholder revolt, saying in a statement late Saturday that he was "pleased that so many of our shareholders joined us in expressing" management's view that Microsoft's offer undervalued the company.

Yahoo co-founder and Chief Executive Jerry Yang was quick to declare the dance with Microsoft was over. "With the distraction of Microsoft's unsolicited proposal now behind us, we will be able to focus all of our energies on executing the most important transition in our history so that we can maximize our potential to the benefit of our shareholders, employees, partners and users, " he said in a statement.

In a letter to Yang made public by Microsoft, Chief Executive Steve Ballmer said he was willing to raise his offer to $33 per share, which would have reflected a 70% premium to the price at which Yahoo's stock closed the day before Microsoft's Feb.1 offer. Ballmer indicated that Yang wouldn't agree to a deal for anything less than $37 per share.

"After careful consideration, we believe the economics demanded by Yahoo do not make sense for us, and it is in the best interests of Microsoft stockholders, employees and other stakeholders to withdraw our proposal," said Ballmer.

Ballmer also said he decided against a hostile takeover attempt because it would have involved a protracted proxy contest, and he concluded that Yang would take steps that would make Yahoo undesirable as an acquisition for Microsoft.

In particular, Ballmer noted that Yahoo's proposal to outsource its search advertising to rival Google Inc. (GOOG) would make Yahoo undesirable to Microsoft because it would create a host of regulatory issues and fundamentally undermine Yahoo's own strategy and long-term viability.

Microsoft said repeatedly that buying Yahoo would be its best opportunity to narrow the gap with Google, which dominates Internet search and the online text advertising market.

In the absence of a Yahoo acquisition, Ballmer said Microsoft has a compelling plan to bolster its business through innovative services and strategic transactions with other business partners. "While Yahoo would have accelerated our strategy, I am confident that we can continue to move forward toward our goals," he said.

For Yahoo's part, Bostock argued that the company is "profitable, growing, and executing well on its strategic plan to capture the large opportunities in the relatively young online advertising market. Our solid results for the first quarter of 2008 and increased full year 2008 operating cash flow outlook reflect the progress the company is making."


Source: CNN Money

Yahoo's stock is going to plummet in value now as they gained almost $10 shortly after the offer. It would be kinda funny if the stock price got cut in half and MS got off with a cheaper deal.

I just can't see these two guys working well together. Jerry Yang and Steve Ballmer?

LOL, Yahoo's stock has dropped almost $5 and now they've made their investors really unhappy as many would have settled for just over what MS was offering. Guess that Jerry & Co. didn't expect MS to just leave the negotiating table. IMO (and likely several other people's), Yahoo should have taken the offer and ran. Maybe MS will wait a few months for the price to drop back down to around $20 and then offer them $25/share.

Jerry Yang yesterday: "We were totally willing to do a transaction, and they walked away," Yahoo CEO Yang told the Financial Times, adding that he is open to renewing negotiations with Microsoft.

"We've put out a way of having them buy Yahoo, give them a path to do that. If that's what they want to do, we would be open to a conversation."

AFP

Grav!ty wrote:

Jerry Yang yesterday: "We were totally willing to do a transaction, and they walked away," Yahoo CEO Yang told the Financial Times, adding that he is open to renewing negotiations with Microsoft. "We've put out a way of having them buy Yahoo, give them a path to do that. If that's what they want to do, we would be open to a conversation." AFP

He probably only said that because he and the the rest of the directors are now in the position to possibly lose their spot in the board of directors this summer.

Microsoft-Yahoo Deal Really, Seriously Dead This Time


I'm quite happy MS hasn't absorbed them. Perhaps it would have been good for Yahoo, and a deal would certainly have been good for MS, but I think it's good for us all that Yahoo have remained independent.

I just heard that news broke a few hours ago Yahoo WILL display Google Ads again. So it looks like they've officially buddied up after all.

kanaloa wrote:

I just heard that news broke a few hours ago Yahoo WILL display Google Ads again. So it looks like they've officially buddied up after all.

I see that. I wonder how that's going to work in practical terms. I'll have to give Yahoo another try in the next week or so to see


Yahoo, Google announce online ad alliance
6 hours ago

SAN FRANCISCO (AFP) — Yahoo and Google on Thursday announced a much-rumored alliance to put the Internet search king's expertise to work pumping money from its floundering rival's online advertising.

Yahoo hopes the alliance will bolster its sagging fortunes and help stave off a campaign by billionaire corporate raider Carl Icahn to overthrow the board of directors and sell the pioneering Internet firm to Microsoft.

The deal gives Yahoo "the opportunity to deliver more relevant ads to users and provide advertisers and publishers with better advertising technology to help them succeed," Google chief executive Eric Schmidt said in a statement.

"This agreement will preserve the competitive and dynamic online advertising space."

Yahoo says the deal lets it run ads supplied by Google alongside Yahoo Internet search results and on some of its web properties in the United States and Canada.

In a move evidently crafted to address anticipated anti-trust concerns, the agreement frees Yahoo to also display paid search results from other third parties and its own Panama ad platform.

Source: AFP