Microsoft Getting Impatient With Yahoo

According to the Wall St. Journal,  people close to the company say Microsoft (MSFT) has no plans to raise its bid for Yahoo! (YHOO)

While speculation has swirled that Microsoft was poised to raise its bid, Microsoft is instead biding its time. Such tactics of exercising pressure are standard in deal negotiations but people close to Microsoft insist the stance isn’t posturing. Sure.

The software giant likely hopes to use the potential of a sweetened offer to lure Yahoo into serious discussions. So far the two sides have only had one meeting.

It is unclear at this point as to why Microsoft is sending this signal now. Perhaps, Ballmer figured Yahoo’s just-closed first quarter will be awful enough that $31 a share - a 62% premium will start to look pretty good to Yahoo’s board. People close to Yahoo on the other hand have suggested that a $40 a share offer would be acceptable.

Meanwhile, Microsoft’s strategists believe that time is on their side and they argue that Yahoo’s recent roadshow failed to dazzle investors and nothing in its presentations will justify a higher price.

In addition, the strategists argue that the worsening economic downturn and stock-market weakness make the original bid look even more generous.

Both Microsoft and Yahoo have fallen far behind rival Google (GOOG) in the lucrative field of Internet search. Yahoo’s earnings and share of the online search market have badly trailed Google.

A Microsoft-Yahoo combination would create a powerful number two player in the online search business, which Google commands. It would also be one of the biggest tech deals in years, on a par with Hewlett-Packard’s $25 billion acquisition of Compaq in 2002.

Comments

[the bald one:]

Ms will only get its way if the regulators Chinese, European, and American approve it! And that's highly doubtful!

2008 Apr 01 06:29 AM

[Tom B:]

"According to the Wall St. Journal, people close to the company say Microsoft (MSFT) has no plans to raise its bid for Yahoo! (YHOO)"

This sounds to me like a gentle way to "walk away". I would be surprised if Yahoo should accept a deal which was shown to be unaccceptable and hasn't gotten any better. It's actually gotten worse.

Also, I agree with the bald one regarding antitrust: our regulators may all be "on the take", but the EU would be mad to let such an obviously consumer-hostile deal slip through.

2008 Apr 01 09:46 AM