Yahoo’s Dangerous Stock Dip (Hey, Microsoft, Don’t Blow It!)
by Kara Swisher
Posted on June 24, 2008 at 11:23 AM PT
Right now, Yahoo shares are flirting with a dangerous threshold of below $20 a share–at this moment, shares are at $20.88.
Of course, the last time Yahoo (YHOO) went under the $20 level is when Microsoft (MSFT) mounted its takeover bid for the company, which was unveiled Feb. 1.
The price right now means Yahoo has a market share of almost $29 billion, substantially below the offer of $33 a share Microsoft offered that was worth upwards of $41 billion.
“Depressed does not even begin to describe it,” said one major Yahoo shareholder, in response to BoomTown’s query about what the mood was among Yahoo investors.
As I wrote earlier today, Microsoft does not seem interested in picking up Yahoo now at any price.
But if Yahoo shares decline further, it should think twice. And then it should slap itself silly, until it realizes the opportunity it might be missing.
Who cares if Yahoo partnered with Google (GOOG) to spite it? Who cares if its management pretzeled itself into every shape possible to avoid Microsoft? Who cares if Yahoo’s board has consistently misbehaved and sent the software giant really mean letters?
Why? Because, for all its management problems, Yahoo remains Microsoft’s single most important path to winning in the online display business and at least keeping itself in the game with Google in search and the search-ad business.
Yahoo is a much tarnished jewel, to be sure, but a jewel nonetheless.
And, if you really think hard about it, it is still Microsoft’s best chance to shine.
Follow Kara on Twitter | Follow AllThingsD on Twitter
Comments
I get the financial side of the argument, the part about maximizing Yahoo! shareholder value, but I don’t think anyone has really ever made the case for why this would be a good idea for Yahoo!. Or for Microsoft, for that matter.
The online ad business is not and has never been simply or even mostly about scale. Scale for scale’s sake is not an argument for a Microsoft takeover of Yahoo.
There was a time not too long ago when Google didn’t have anything like the scale to dominate the space, and both MS and Yahoo trotted out strategies to take their “rightful” place as competitors to Google… and both failed. Microsoft has in fact brought forward several (incoherent) strategies, none of which has worked, leading them to require a hail-mary pass to even stay relevent.
But scale is a function of the execution of a strategy, not some panacea that can be bought. I have seen no evidence that Microsoft has done anything to solve this fundamental problem – and so buying Yahoo would have been a faster way to race both companies to the bottom.
Posted by Michael Boyle at June 24th, 2008 at 8:15 amFundamentals aside, Yahoo is the most visited site on the web ( i think) That’s worth a premium that goes beyond fundamentals. If somebody figures how to take Y to the next level, then Katie bar the door. The current 4% ^ uptick validates this.
Posted by John Brady at June 24th, 2008 at 10:31 amMS dodged a bullet, even if they got Yahoo for free it would be a bad move as it would distract management attention away from their core business.
With operating systems getting lighter and enterprise apps migrating to the web churning out new versions of Windows and Office won’t bring in the revenues they once did. MS needs to concentrate on that. If they want to get into web advertising they’d do better to gamble on a few innovative startups rather than try and rescue a sinking ship like Yahoo.
Posted by Robleh Ali at June 24th, 2008 at 12:51 pmYes, Yahoo has been up there as the most visited site on the web. That does make a big difference in the middle of this so-called declining. It’ll be interesting to see what happens…
Posted by becca allen at June 24th, 2008 at 5:53 pmhttp://www.fundinguniverse.com.....story.html
Kara makes it appear that if MSFT does not make a deal for YHOO – its all over. She doesn’t have a clue. Obviously she fails to recall that early in their career they faced ‘unsurmonuntable odds’ when they faced the dominant IBM. They face Google as a major challenge. Can they repeat history – I say yes – Google – a fabulous company – is going to go into their dip within two years as do ALL companies. There are serious issues internally at Google brewing. Sara thinks they are like the Titanic -’unsinkable’ – oh such a short term insight.
Posted by bob rocklin at June 25th, 2008 at 7:56 am