What's Next for MicroHoo?

Microsoft's (MSFT) deadline for Yahoo (YHOO) has passed and the market is rife with speculation about the future of MicroHoo. In the past few weeks, Microsoft executives' browbeating about walking away from the deal has made many analysts estimate as much as a 60% chance of this deal not happening. I, however, believe this deal will close soon without a proxy fight.

Microsoft will not go hostile with their current offer. With a current offer that values Yahoo at about 29.5$ per share, Microsoft is bound to lose the proxy war because even large investors, such as Bill Miller, have declared that they want the price raised. Raising the price and then going to proxy fight seems totally stupid.

Microsoft will not walk away from this deal. Obviously Steve Ballmer has had his eyes on Yahoo for some time now. Microsoft has determined that Yahoo is essential for its future and a few billions is not worth betting on the company's future.

As Google (GOOG) eats the search share from Microsoft and Yahoo, time is of the essence for Microsoft. As time passes, Yahoo's value is going down for Microsoft, so Microsoft will want this deal done fast. I will not be surprised if the deal is finalized in next couple of weeks at north of 35$ per share. When this deal is finalized, the shares of both companies will rise, but in long run, I would be highly bearish on Microsoft.

Comments

[bato sa bato:]

North of $35. seems more reasonable for the deal tobe sanctified!! The difference between the initial offer and the final can easily be earned by the joint MICROHOO
not to mention the hundreds of million dollars they can save by joining forces earlier.

2008 May 01 10:58 AM

[raja:]

No deal. Yahoo is going to teens or low 20s when Microsoft walks away. We all know how Yahoo is performing in the market;lackluster earnings, loss of market share to Google and you add recession to the equation. In another 3 months, Microsoft is going to get Yahoo much cheaper for around $24 / $25 and Yahoo shareholders will not want to lose out on that second chance. A 20% discount to the current offer and no fights and suspense to deal it.

2008 May 01 11:51 AM

[reader:]

$31 per share and not a penny more! That my friends is a 62% premium on what was a less than $20 stock. I do not agree that a few billion (send a billion my way) is no big thing. As was once said, "a billion here and a billion there and pretty soon you are talking some real money." Hardball is the way to go. Unless someone comes along with a better offer than $31 that would be as high as I would go. $35 or $40 is just pie in the sky.

2008 May 01 12:05 PM