Microsoft Blinks, For Now

The news is in. Microsoft (MSFT) has given up on its desire for a hostile takeover of Yahoo (YHOO), at least for now. (See this story for details.)

According to the news report, Microsoft believes Yahoo was asking for too much money for itself, and Microsoft was not willing to either cough up the cash or persue a potentially protracted process with no guarantee of success. (I'm guessing they figured shareholders of Yahoo would probably be wanting to hold out as well.)

So, what does this mean? The markets were closed Friday when the news came out, but what happens Monday? Will Yahoo stock drop like a led brick (Microsoft is counting on it to apply further pressure to Yahoo to possibly reconsider), or is this good news to Yahoo and their shareholders? How about Microsoft shareholders? Were they preparing to get a good deal or a raw deal out of this proposed union?

I still contend, as I wrote here, that Microsoft desperately needs to find a way to make this work to boldly move them into the "Information Age" and away from the "Computer Age", just as much as Yahoo needs Microsoft to fail if the community culture that is Yahoo hopes to survive. For the first time in its history, Microsoft is reporting sagging sales of its flagship product, Windows, in all of its incarnations. (See this story.) This may be due to a wide variety of problems, most of which are probably related to its own lack of quality assurance, and corporate IT people and home users alike looking for different solutions.

Surprisingly, Apple (AAPL) might be finally taking the wind out of some of Microsoft's sales figures. Although a bit dated, this article goes into some length to explain the very interesting dynamics shift between Apple, Microsoft, and other PC vendors over the years. According to more recent accounts, Apple continues to get stronger as Microsoft continues to slip, fall and bleed. It will take Microsoft a long, long time to bleed dry, but if they don't do something to stop the bleeding soon, Microsoft will likely become extinct in the computing field.

Is it any wonder that they want to stem the tide by acquiring Yahoo? At least that would help lead them into the new direction of computing in the information age rather than the age of the desktop, an area in which they find themselves floundering for the first time in a long while. It might even be enough for Microsoft to survive as a business.

Disclosure: none

Comments

[Jimmy Goodwin:]

I wonder how msft share price will react.

2008 May 04 06:42 AM

[Mac'em X:]

"Will Yahoo stock drop like a led brick?" Only if led off a cliff.

Come the new week, we'll all be anxious to see the effect on both companies' stock prices. It'll be a nice indicator of whether collective investor intelligence saw the potential merger as good for one, both, or neither. (My bet: a drop for both, but more for MS.)

2008 May 04 09:07 AM

[User 159379:]

Yahoo will drop to $24 per share, The lawsuits will begin rolling, Yang will be forced out and microsoft will get yahoo for its original offer..Its all part of the game.

2008 May 04 09:48 AM

[Ames Tiedeman:]

YHOO will be crushed on monday. Yahoo management made a huge mistake. YHOO will not ever see 37 unless they get their act together and monetize their assets.

2008 May 04 10:23 AM

[709394:]

Yahoo will drop to $19. A stock wouldn't worth much at a 60 P/E. Microsoft will stay put, a little jitter, maybe. The final outcome, the Yahoo board would be sued. A couple more quarters down the road, Yahoo is unable to deliverthe finance result as said by Yang. Yang only cooked up a prosper future in order to get more money from Microsoft. Yahoo will fall to $12. Microsoft would devour Yahoo at $20.

2008 May 04 10:36 AM

[My Idea:]

thank god microsoft is gone!

2008 May 04 01:59 PM

[globalmacro:]

Who cares about the dinosaurs when you can own Google now? Pure irrelevance.

2008 May 04 06:22 PM