Jack Yetiv

Yahoo's Tough Week Ahead

I think what MSFT did has very little downside for MSFT--and may have a lot of upside. I would have done exactly the same--I would have raised my offer to the limit I was willing to pay--and then pulled it if it was declined, and then published my letter to Yang for the whole world (ie, angered YHOO investors) to see.

When MSFT first made the offer, Yang and company said the pre-offer stock price was not reflective of the value of the company, and MSFT's offer made the market realize what that value was. In addition, the earnings report hadn't come out.

Well, now the earnings are out, and all shareholders have now seen the "value" of YHOO. If YHOO crashes on Mon, as most expect, then Yang's bluff will have been called. If YHOO stock price languishes in the 20's or even the teens another month or two, and MSFT makes another offer at $31 (or maybe even less, but I doubt it, possibly even at $33), and Yang is already facing a bunch of lawsuits, I somehow think MSFT's second offer will be far harder to dismiss than the first one.

There is, of course, one other possibility, although I consider it unlikely, which is that Yang refused the upgraded offer because he has already arranged something just as good with GOOG. This seems unlikely in view of antitrust reasons. There probably will be more interactions with GOOG that will benefit both GOOG and YHOO, but probably not enough to get YHOO stock price back to the low 30's.

Jack Yetiv