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Microsoft to Buy Yahoo: Now Wait Just a Minute
Friday, February 01, 2008
Two days ago I posted a story about Yahoo announcing their Q4 earnings. In the post I stated, "... Before everyone starts pushing the panic button suggesting that Microsoft is going to purchase Yahoo, wait just a minute..." Not two days later Microsoft puts in a bid to buy Yahoo (again), this time for $44.6 billion. The deal values Yahoo at $31 a share - a 62% premium to the stock's closing price before the announcement. Doesn't this seem undervalued to you? Yahoo (YHOO) stocks has jumped after the announcement ans are currently around the $28/share mark. This is a far cry pre-Google when Yahoo's share price peaked at $108.17 on Dec 31, 1999.

Do you actually think that by Microsoft acquiring Yahoo would take market share from Google? No it would take market share from Yahoo. Yahoo couldn't dent Google, Microsoft is so far behind in search that ASK might catch them within 12-18 months. To me this is a desperation act from Microsoft and an insult to Yahoo. This is more of a reactive move by Microsoft as opposed to an innovative one. They just cannot keep up with Google in terms of innovation, nor can they keep up with ASK for that matter. (At least in terms of a dynamic search product).

George Askew and Scott Devitt of Stifel Nicolaus make a great point when they say "...Hostile-takeover acquisitions in the technology space are rarely successful as employees and management of the acquired company will often depart the combined entity following the acquisition..." This deal will NOT go through. At least not now and not for this amount. Yahoo is not that desperate.

More Report on Microsoft's Attempt to Buy Yahoo

CNN: Microsoft offers $44.6B for Yahoo
Wall Street Journal: Nasdaq Slumps While Yahoo Soars
Businessweek: Microsoft Finally Makes Its Move on Yahoo
Search Engine Watch: Yahoo Board, Sans Semel, to Consider Microsoft Bid
TechCrunch: What Would a Combined Microsoft-Yahoo Look Like?
TechCrunch: WOW. Microsoft Offers $44.6 Billion To Acquire Yahoo
Search Engine Land: MSFT + YHOO: What Would Microsoft Yahoo Look Like?
Search Engine Land: Microsoft Call: "We Love The Yahoo Brand" [But Can The Deal Happen?]
Microsoft Offers to Buy Yahoo for $44.6 Billion (Update7)


posted by Jody @ Friday, February 01, 2008  
  • At 2:55 PM, Blogger Rob said…

    Personally I don't think the deal will go through. I think there is too much potential for Yahoo and I think shareholders know it.

    However, with uncertainty in the American markets, and a bona fide offer on the table which offers more money than the shares are currently worth, shareholders wouldn't be too smart if they didn't at least consider the offer.

    The other "wildcard" is Jerry Yang. Sure it's his company and yes he's in charge again, but did he come back to turn things around, or did he come back to broker the deal with Microsoft?

    Ponder that for a minute, then decide if M$ will buy Yahoo.

  • At 12:39 AM, Blogger aysenur said…

    Thank you for the article. I have read your article two days ago too. I agree that Microsoft and Yahoo can not just get the market share of Google. Thought this is a competitive sector, it is one of the only sectors where there is a big gap between the market shares.
    I am an advertiser using all the three search engines and I know how important customer service is. Yahoo had never good customer service since 1,5 year. Microsoft might make it better but Google does not only have the best market share but also best customer service.

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