As Yahoo Stock Drops, Microsoft’s Sweetened Search Gets Cheaper
by Kara Swisher
Posted on June 30, 2008 at 11:02 AM PT
Apparently, according to Yahoo, Microsoft is as clever and deceptive as the buff and gun-toting Angelina Jolie in the new film “Wanted.”
BoomTown will get to that later. But with Yahoo (YHOO) stock hovering close to $20 a share, Microsoft (MSFT) has certainly got to be thrilled that the sweetened search-ad deal it is currently preparing–including forking over about $10 billion for one-third of the company–is getting cheaper by the minute.
With Yahoo’s stock at a disturbing $20.96 right now–and headed lower, it seems–its market value is only $28.4 billion, a depressed number that has sent its investors into a tizzy.
As I wrote last week, it’s those investors who are pushing Yahoo’s board to consider accepting a new version of Microsoft’s search-ad proposal that it turned down in favor of one from Google (GOOG) recently.
Those same investors had urged Microsoft to make a sweeter offer, promising a more cooperative Yahoo, especially now that it faces an upcoming proxy fight with billionaire Carl Icahn at its Aug. 1 board meeting.
Microsoft has no interest in swallowing Yahoo whole–although the dropping price does make it kind of tasty.
But it has been working on a beefed-up search deal, with more revenue guarantees on search ads and a higher price for search assets it would buy outright.
The centerpiece of the offer, of course, would be a deal to buy about one-third of Yahoo from existing shareholders at a premium to where it is trading now.
In its previous search-ad offer, Microsoft had offered to buy 16% of Yahoo for $8 billion at $35 a share.
Many large investors, disillusioned with the leadership of CEO Jerry Yang, have warned him and the board that they will vote with Icahn unless Yahoo engages with Microsoft and fast.
If Yahoo does change its mind and strike a sweeping search-ad deal with Microsoft, though, it would have to pay Google a $250 million fee for killing the deal.
Still, Yahoo took the opportunity today to ding Microsoft once again about its botched takeover battle, in a regulatory filing related to the proxy fight.
In the document, it called the software giant “unresponsive and inconsistent,” and noted “the record casts doubt on whether Microsoft was ever committed to a whole company acquisition.”
(See Yahoo’s slide on the issue below–click to make it larger)
Ooooh, it almost sounds like Yahoo is saying Microsoft carefully planned this intricate scheme to get Yahoo into this prone and disastrous position.
It’s almost as complicated as the plot of the thriller “Wanted”–BoomTown recommendation: Two thumbs up!–in which an office drone played by James McAvoy is whipped into deadly-assassin shape by a leather-clad Angelina Jolie and also badly tricked by her.
Yahoo’s leadership only wishes they had Angelina to kick them around.
Unfortunately for shareholders everywhere, they seem to be doing a very good job of it all by themselves.
As an added plus, here’s the “Wanted” trailer:
Comments
Again, though,
R.I.P.
Laters…:)
Posted by Mark Light at June 30th, 2008 at 1:36 pmR.I.P. Microsoft. Has a nice ring to it, doesn’t it?
Ballmer and company.
“Microsoft has no interest in swallowing Yahoo whole–although the dropping price does make it kind of tasty.”
How does this make sense? The stock price is almost exactly what it was when they made the first offer, so why would it seem like a bargain now?
Posted by scott preece at June 30th, 2008 at 2:27 pmIt’s a bargain, because unlike before where it could be argued that Microsoft had to reach upwards to find the right price because Yahoo felt no pressure. Its the opposite now, Yahoo has jumped off a cliff hoping to flap its wings and fly. With its key execs leaving as fast as they can. A google deal that will earn some money upfront but in the end will reduce the value of their own advertising stream towards Google’s benefit – they are approaching what many consider as terminal velocity for the company’s future.
Yang’s ego and approach to the Microhoo offer has alienated many of his shareholders. With the company’s leverage pretty much used up. It is where it was before, a failing business plan that fails to expand. Investors panicking that they will lose all of their investment and looking for a small ray of sunshine. If Microsoft could offer in my opinion between $25 to $30 a share they could get the business. As shares nose down below the $20 mark it will only increase their chances. Because even at that, the price tag would still be substantial especially in an area where availability of capital investment is dodgy.
In the last year all Yahoo managed to do was to prove that Microsoft was the best “$” alternative. The ball was in Yang’s court and he flubbed it. Not because he failed to sell to Microsoft, but that he failed to win the ‘hearts and minds’ and patience of its shareholders. Instead he showed the kind of ego in a CEO that draws self-styled Don Quixotes of Wall Street looking to knock down another arrogant rich guy(hey didn’t say they weren’t hypocritical).
Exit strategies are being looked at by all, and one of the best keys in town is held by Microsoft. If Microsoft does purchase the company they will need to expend some to retain what is left from the ongoing brain-drain at Yahoo (which is happening at all level, most of which has been induced by Yang). One of the preconditions should be the removal of the recently added Platinum parachutes clause into the company’s ‘charter’.
Yahoo needs something and its not Google. It might not really be Microsoft, but its slowly boxing itself in and can’t expand out the way it should. It needs a big teammate, Microsoft offers the best alternative not only for growth, but also for long term survival.
Posted by Larry Edwards at June 30th, 2008 at 7:18 pm