Microsoft: No Intention to Overbid Yahoo

Microsoft’s (MSFT) hesitation, which continues to remain evident more than four days after an ultimatum issued to Yahoo (YHOO) to begin talks, points to the difficult decision that the software company now faces over whether to mount an all-out hostile offer.

Steve Ballmer yesterday held a Town Hall meeting with employees where - according to Silicon Alley Insider - he said:

"We’ve got basically the three big options in front of us. There’s the friendly deal, there’s an unfriendly deal, third path is to drop the current offer altogether and simply walk away," he told employees.

“I know exactly what I think Yahoo is worth and I won’t go a dime above,” Ballmer said, adding that Microsoft should be in a position to make an announcement about Yahoo “in very short order.”

He continued:

Why buy Yahoo!?

It accelerates scale. Gets us more advertisers, gets us search. Yahoo’s not a strategy. It’s a part of a strategy. We’re interested in paying for it at some level and beyond that level we’re not willing to pay for it. I know EXACTLY what I think Yahoo is worth and I won’t go a dime above.

We missed the deadline but we’re in the process. I report nothing. I've got nothing to say today.

We’ve got basically the three big options in front of us. There’s the friendly deal, there’s an unfriendly deal, third path is simply to walk away. Given it’s just a part of a strategy – if neither of those look good, we walk away. It makes sense at the price we proposed and I think it’s a good deal for Yahoo shareholders. It’s a huge premium. It’s one of the largest valuations.

We oughta know something – we oughta announce something in very short order.

There’s nothing definitive to say today. We have a great plan and strategy and we have a long way to go. We are not number one and number one is a lot bigger than us. There may not be many people here that remember when we were a distant number 2 before. You gotta be willing to look outside of the box and Yahoo is $44 billion outside of our box. If Yahoo doesn’t happen there’s a number of other things we’ll look at.

Ballmer’s comments to employees were confirmed by a Microsoft spokesman.

Microsoft remains locked while deliberating over its next move in the three-month battle for control of Yahoo, amid signs that it was edging towards launching a proxy fight to try to gain control of the internet company’s board. Yahoo has long insisted that Microsoft’s offer of $31-a-share substantially undervalues the internet company. Top Yahoo shareholders have indicated they want $35 to $37 a share.

Comments

[citetez:]

Microsoft should not go hostile. They should say that if Yahoo has not indicated an interest on talking realistically by next Friday, MSFT will not go hostile, will not raise their price, but rather, will walk away and exploit other opportunities. If they say it and mean it, Yang will be put in a corner where he has to talk.

2008 May 02 07:56 AM

[Alex Filonov:]

Yang has no intention of selling Yahoo! to Microsoft. His problem is that other shareholders might want it. Not all of them: quite a number of Yahoo! employees own shares of company and most of them are not happy with this deal. In short, MS going hostile at current price might not work.

2008 May 02 10:21 AM

[buyforeclos...:]

Wrong Ron...bid will be at least $33 which basically matches the original bid of $31 ( decline in Msft stock $ ) so $35 is not a stretch

2008 May 02 10:29 AM

[reader:]

"Top Yahoo shareholders indicate that they want $35 to $37 per share." Yes, and people in hell strongly indicate that they want ice water. I'm starting to get a little blue in the face by saying this, but $31 is the number (62% premium from what the stock was selling for at offer time) and not a penny more. If not, MSFT needs to walk away.

2008 May 02 02:25 PM