Microsoft's Big Move on Yahoo?

Wall Street is a big prediction market and traders are increasingly getting antsy about Microsoft’s next move regarding Yahoo. Thus far, Microsoft has kept people guessing, but may reveal its plan on Wednesday.

As we all know, Microsoft’s negotiate-or-else deadline passed on Saturday and it has been radio silence ever since. The two primary moves for Microsoft are to launch a proxy war or walk away. A few days ago it was a no-brainer that Microsoft would launch a proxy war, but if you follow the stocks you see some serious uncertainty.

At one point today, the spread between Microsoft and Yahoo shares were the widest since the deal was announced. Yahoo shares dipped below $26 a share on Tuesday before closing higher based on a rather thin CNBC report that Microsoft was going to launch its proxy war on Wednesday. Update: The Wall Street Journal reports that Microsoft may make its move “as early as Wednesday,” but also doesn’t seem to have concrete information what the software giant will do.

So what can we read into the Yahoo trading? For starters, the market is giving a higher probability to the idea that Microsoft could walk away or even lower its price.

Collins Stewart analyst Sandeep Aggarwal writes in a research note:

We think that the market is applying higher discounts on the risks of MSFT walking away or reducing its offer under a proxy war situation…We think that the only scenario MSFT is likely to walk away from YHOO deal is to create a situation very similar to what Oracle did when it announced the acquisition of BEA Systems (BEA System accepted Oracle’s original offer, once Oracle walked away).

In other words, even if Microsoft walks it’s not over.

However, it is still widely expected that Microsoft will announce its alternate slate of directors. TechCrunch has details on the alternate board candidates. In theory, Microsoft could oust Yahoo’s board in one swoop if the prey holds its annual meeting anytime soon (Yahoo filed a proxy-ish amendment to its annual report earlier today).

The bigger question here is this: Is there an elegant way to seal this Microhoo deal and save face on both sides? Susquehanna Financial Group analyst Marianne Wolk reckons that there is a third option for Microsoft that allows Steve Ballmer & Co. to keep his current offer, win Yahoo and prevent a time-consuming proxy war. The software giant’s current bid is 50 percent cash and 50 percent shares. If Microsoft went all cash or raised the percentage of cash to stock in the deal, it could win Yahoo and everyone would save face.

We’ll know soon enough.

Here’s a look at the various scenarios cooked up by Collins Stewart based on intraday prices (click to enlarge chart):

Comments

[John Capozzi]

I have a question for Alpha and all media and news groups that have been reporting on this merger. Why on Yahoo's part do you not only discuss or even engage on the massive potential in revenue growth that Allibba, Softbank, Yahoo Japan, Yahoo South Korea, India etc etc brings to Yahoo's bottom line in the near and forward looking years? Why as maJor partners to Yahoo USA have they not been asked to come to the table as well. Allbba and Softbank have been aleinated from the press and this whole merger and Allibba has shown its dislike to the merger and price in whole and has already spoken out that they are looking for a suitor to take out Yahoo's 40% ownership it has in Allibba. Jack Ma set the foundation for Yahoo's biggest research and development center in India in Dec 2007 and Yahoo went forward with it a month ago. I do not hear from the media what outstanding QTRS and Yearly earnings that Allibba and Softbank posted with outstanding forward looking guidance which would greatly improve Yahoo's bottom line. Why is this? Heres one for a speculation: How about a team up of Allibba, Softbank and Baidu making a higher bid and with backing from the Chinese Government for funding just like in the case of Lenovo when they bought out IBM'S personal computer sector? Lets say they give a bid of 40-43 share this would not only meet Yahoo's ask price but also would increase key employee's stock option valuations and keep them on board. As far as anti trust problems IBMS sale to Lenovo also showed a problem with USA national security issues and it passed without much problem. It fact this merger or team up i am talking about wouldnt have nearly any problems like it would with a Microsoft merger. Why doesnt any media or news groups answer this or even talk about it. Why do you not mention the culture differences and that no foreign companies like to be bullied or threatened? Look at GM and see where their bully tactics sent them. A team up here of these companies and holding onto the Yahoo name would make better sence. You an other media and news groups have stated that the major market in the 100's of billions of dollars now and going into 2010 and the maor areas will be CHINA, INDIA and the rest of all Asia. This looks great to Yahoo because of these partnerships. Remember as early as Nov Yahoo was trading over 34 dollars. Why again does the media shy away from this and stay silent? My take is Microsoft raises bid to 35-38 and must bring Allibba and Softbank to the table as well. Please reply thank you.

[John Capozzi]

I AM TALKING ABOUT SEARCH AND ADD REVENUE IN MY POST BEFORE THIS ONE. WHY DOESNT THE NEWS MEDIA TALK ABOUT THE POTENTIAL YAHOO HAS INSTEAD OF ALWAYS FOCUSING IN ON MICROSFT? WITHOUT SEARCH AND ADD REVENUE WHERE AS MICROSOFT HAS LOST 100 OF MILLIONS TRYING WHERE AS YAHOO HAS BEEN GAINING AND SHOWN A PROFIT? I WOULD LIKE TO SEE THE MEDIA AND NEWS GROUPS COVERING THIS MERGER LOOK AT THE OUT LOOK FOR POTENTIAL IN THIS AREA. IT CLEARLY SHOWS TO ME THAT YAHOO'S BID PRICE FROM MICROSOFT IS UNDERVALUED. I HOPE YOU WILL ANSWER THESE TWO POST FOR ME AND THE OTHER INVESTORS IN YAHOO. IT UST SEEMS EVERYTHING IS ONESIDED HERE AND OTHER MEDIA AND NEWS GROUPS AND IT FAVORS MICROSOFT. EVEN THE PLAYING FIELD AND BRING OUT THE REWARDS AND POTENTIAL FOR YAHOO IN THESE PARTNERSHIPS AND YOU WILL SEE THAT YAHOO DOES HAVE OPTIONS. YES I AM A INVESTOR IN YAHOO.

[xing-hu]

Why are we treating this as if it were a rational process? MSFT sees only a "going concern" that might salvage its online ad aspirations. Why treat an offer from MSFT as if it were "strategic" when we know that in Redmond that term is not known, much less understood. As for value, $v.Sh, as fat as MSFT is concern its offer it is equal to all cash.

[BATO n COMPANY CHGO.]

As a fellow yhoo investor,I concur with John Capozzi's comments that the media seems more focused on Msft and its so called premium offer than yhoo's true and fair value.I give Mr. Yang and company great compliment and respect for standing-up against a bully like Msft. amidst this economic slump and crisis not to mention the ongoing process of rebuilding yhoo from Mr. Semel's negligence.I hope if Yhoo is left alone that it'll prove a lot of people wrong and be back as a formidable giant as it was!!!

[John Capozzi]

Now Microsoft is in a position to raise their bid. Why does the media protect this company with silence on of the great properties and partnerships Yahoo has in the Asian market? Why cant they just give the potential of great rewards on Yahoo's bottom line from these properties? This merger is a joke and it seems like a direct attack to ram down Yahoo's share price through manipulation and the bad press or no coverage at all for Yahoo. I would love to see a team up of Baidu, Softbank and Allibba for all of Yahoo at 43-50 dollars a share and if needed funding from the Chinese Government. This could very well happen as in the Lenovo deal when they bought the IBM'S personal computer sector. This would also open the door for the USA market and it would make Yahoo the biggest search and add and internet media company in all of Asia and India and possibly the whole world. I wouldnt be surprised if this is not in the wrks now. The bid price in the range of 43-50 would keep key employees in Yahoo and their share options in check with a higher valuation and not subect them to a flip flopping company like Microsoft that seems to have the bad management and advisors not Yahoo. The media has not given Yahoo much credit at all and has just ignored Allibba and Softbank which is a culture insult and they should be asked to the table with Yahoo. Analyst have stated that they have never seen such a oke in a merger in all their years in business and it falls on Microsoft and its bullying and greed and they know that Yahoo is at least worth i the high 30's and so does the media. So why doesnt lay a chart out for all to see the properties and the different qtrs their partners are having with great out look guidance. Yahoo my new bid is now 37-45 and Microsoft will be able to grow and be the biggest threat to Google and not be a shell of the company they are now in 3 years. Yes i am a Yahoo investor and i hope Mr. Yang reads this.

[reader]

Well, all you yahoo investors I would just like to say that when MSFT walks you can all kiss your share values adios.

[John Capozzi]

And you can kiss Microsofts future goodbye to search and add to survive if you walk away or even go hostile. Microsoft will be a shell of the company it is today and two key assets they need with Yahoo will pull out and that is Allibba which has aready stated that the bid is way too low and they dont like the mix with Microsoft. Bullying and greed plus ego will show in the long run that it does not work with foreign and different culture companies. Microsoft i bet is will raise the bid to 38-40 and close this deal over the weekend if they are smart. They will never make it in search and add or in Asia by buying smaller companies. They have tried that tactic and it doesnt work. THEY NEED YAHOOAND MUST PAY NOW BEFORE THEY SIG THAT DEAL IN SEARCH AND ADD WITH GOOGLE. LOOKING AT IT GOOGLE IS THE SMARTER COMPANY AND THEY WILL TAKE THIS MERGER AWAY AGAIN LIKE IN OTHERS FROM MICROSOFT. AGAIN MICROSOFT WILL RAISE BID TO 38-40 IF THEY ARE SMART THIS WEEKEND AND CLOSE THE DEAL OR YAHOO GOES WITH GOOGLE AND AOL AND EVEN BAIDU.

[BATO n COMPANY CHGO.]

It seems like Mr. Ballmer is going to make his call and raise his bid. He tried every means to steal yhoo but failed.Now it's time to pay up and move on !! Although a lot of effort was exerted to keep Yhoo's asian connection at bay and keep yhoo's true value low, msft has no choice but to increase its bid and look forward for future earnings of the combined companies.

[DrBobNM]

is this a joke???


On May 03 08:18 PM BATO n COMPANY CHGO. wrote:

> It seems like Mr. Ballmer is going to make his call and raise his
> bid. He tried every means to steal yhoo but failed.Now it's time
> to pay up and move on !! Although a lot of effort was exerted to
> keep Yhoo's asian connection at bay and keep yhoo's true value low,
> msft has no choice but to increase its bid and look forward for future
> earnings of the combined companies.