Microsoft bids $44.6 billion for Yahoo

http://news.yahoo.com/s/ap/20080201/ap_on_hi_te/microsoft_yahoo

by surya • 18 years ago

82 80 18 years ago

news.yahoo.com

DXL2• 18 years ago

The market is reacting very positively: Yahoo is up almost 60% in pre-market trading, at a market cap of $40B (up from $26B at yesterday's close). Microsoft is down 4% however.

tlrobinson• 18 years ago

The stock market continues to baffle me.

Microsoft is offering $31 per share of Yahoo. YHOO is now trading at nearly $31, up from $19 at the close yesterday.

Why would anyone pay $31 for a share of Yahoo right now? There are two possible outcomes: 1) the deal goes through, and you get your $31 back either in Microsoft stock or cash. No net gain. 2) The deal doesn't go through and YHOO drops back to around $19, losing you about 30%.

Am I missing something?

whacked_new• 18 years ago

The speculation and exuberance.

This rumor is over a year old; it was also first floated around Q1 last year and YHOO's stock price surged that time too. I seriously thought Yahoo was going to sell that time but they didn't. Perhaps this time is different?

mhb• 18 years ago

You're missing a third outcome where Yahoo shareholders effectively haggle over the price and Microsoft offers $40.

jorgeortiz85• 18 years ago

Yes. Microsoft was down 4% on the announcement.

It's merger arbitrage.

Buy YHOO, short MSFT. If the merger doesn't go through, then sure, your YHOO stock will drop, but your MSFT stock will gain.

If you get the right proportion of long/short YHOO/MSFT, you make money no matter what happens.

(Where the "right proportion" is really complicated to figure out, and is often wrong.)

dean4• 18 years ago

This always happens with buyout offers, the buyee's stock price shoots up close to the amount of the buyout offer, but never reaches it. It generally stops a couple dollars short of the buyout price. At this moment, Yahoo is trading at $28.25, still low enough to make a sure-thing couple of bucks per share. It's a gamble though. If the deal falls through, or gets blocked by the government, the buyee's stock price drops back down to where it was before the offer .

carpo• 18 years ago

There's also the possibility another company will outbid the original offer.

anewaccountname4• 18 years ago

When you hear "Microsoft makes a surprise, unsolicited offer to buy Yahoo!", that means there hasn't been any negotiation yet, and that this is the minimum offer (they can accept it right now; the only downside is the risk that they don't pass the reg approval process). Now, you gave two possible outcomes, but as others have mentioned there is a third: a counter offer for more money.

(yet another outcome is that Yahoo twiddles it's thumbs and Microsoft rescinds the offer, but in that case you can look forward to getting in on a nice shareholder class-action lawsuit against the board)

lst• 18 years ago

Micrahoo? Yahsoft? Yicrosooft? Macroyoft?

I'm confused...

fauigerzigerk2• 18 years ago

No no, Microsoft + Yahoo! = Microwho? ;-)

kajecounterhack• 18 years ago

Lets just give up on those ugly names and give them a new name: "The Party"

s3graham• 18 years ago

It'd be Microsoft.

And "Flickr (a Microsoft brand)", etc.

pg• 18 years ago

I think the hope is: Microsoft!

ivankirigin• 18 years ago

That's way too much influence from yhoo!. They'll probably remove the |.

The new company slogan will be "Microsoft. Period."

dfranke• 18 years ago

My hope is !Microsoft.

drusenko• 18 years ago

One thing quite a few people are failing to notice when describing the "huge" premium of 62%: look at Yahoo's historical stock price charts for the last few months or so. Yahoo's taken a real big hit, likely for several reasons that are beyond its control, and it might very well be undervalued. This could be a great chance for MS to give an offer price that Yahoo was trading at a month ago but now seems generous.

fauigerzigerk2• 18 years ago

A company that's been declining for 8 quarters in a row and trades at 40 times earnings (before the Microsoft offer) is not undervalued.

joeguilmette4• 18 years ago

it's rare to see such simple, fundamental and spot on analysis in the tech world.

microsoft's bid on yahoo is a perfect illustration of why microsoft is doomed to failure.

how many startups could they fund with $45 billion? 100? 200? 1000? why exactly do they want to be at the helm of a slowly dying web portal left over from the first dot com boom?

i remember someone talking of microsoft and relating their situation to a victim in a horror film. we can all see the monster lurking behind them, slowly creeping in for the kill. when the sea change of personal computing really does come, whenever that may be, microsoft will not be there, they will be knee deep in shit, trying to claw themselves out of the hole that they've spent the last five years tirelessly digging.

michaelneale2• 18 years ago

62% seems very generous, and with the wobbly market, I guess this is calculated on MS part to make sure it happens (no indecision from anyone).

DaniFong• 18 years ago

"We have dedicated considerable time and resources to an analysis of a potential transaction and are confident that the combination will receive all necessary regulatory approvals."

Uh, really?

aston3• 18 years ago

If the biggest advertising entity on the web (Google) can buy one of the other biggest advertising entities (Doubleclick), I'm pretty sure one of the also-rans can buy another also-ran.

anewaccountname4• 18 years ago

The difference is there is practically no lock-in in advertising systems--Microsoft has demonstrated repeatedly that it will use it's OS monopoly to unfairly leverage things online. If you think they have failed miserably, consider that it was only because of the anti-trust rulings that beige box makers got the right to change the start page.

Also, much of Google's "monopoly" comes from a source that is heavily protected by law: the pagerank patent. Patents are government granted monopolies with limited time; as such, there is little or no legal recourse as any mildly abusive behaviour is expected, tolerated, and what the system was designed to provide.

iamelgringo• 18 years ago

I doubt that Yahoo's board and shareholders will accept the deal. It would be a good way for Microsoft to spend some of it's extra cash, though without getting in to regulatory trouble.

aston3• 18 years ago

It's in shareholders' interest to take that huge per-share premium and run with it. Better than holding Yahoo! until it's a penny stock.

dean4• 18 years ago

People buy stock to make money, and a 62% premium is good money. I doubt shareholders would reject the deal unless they think Yahoo is worth more than that. I doubt they would reject it because of some sort of amorphous anti-Microsoft sentiment.

jmzachary• 18 years ago

Interesting move especially in the context of a recent Garner report predicting bad times for Microsoft (http://www.news.com/8301-13860_3-9862322-56.html?tag=nefd.to...). Obviously, this acquisition doesn't help Microsoft improve Vista or Office, Microsoft's cash machines. Also, does this offer imply Microsoft is less confident about their Live initiative? Will Ray Ozzie be replaced by Jerry Yang?

aston3• 18 years ago

Pretty sure if it's Ozzie vs. Yang, Yang is out in a heartbeat.

And I think this buy is more about strengthening Microsoft's online presence, not their desktop apps.

danielha2• 18 years ago

I was just casually talking about this with an early ex-Yahoo yesterday. We were just pondering the possibilities for Yahoo in 2008. Holy shit -- what a coincidence.

He said this: A Microsoft deal is unlikely because (when he was there) all the Yahoos hated Microsoft. If an acquisition happens, it'd be hostile and the core guys will jump ship.

I nodded in agreement. But then this happens.

DXL2• 18 years ago

"Early this morning Goldman made an awfully timely call, putting out an analyst note at 3:56am PST suggesting that Microsoft should buy Yahoo -- only to freeze analyst coverage of Microsoft at 6:55 AM PST on the news that Microsoft has offered to buy Yahoo and it is providing i-banking support" http://paul.kedrosky.com/archives/2008/02/01/yahoomicrosoft....

Now that's a coincidence...

bkrausz2• 18 years ago

As a current Yahoo I'd have to disagree, from what I've seen in my department (and the departments in my building), I don't think the company is particularly hostile to Microsoft. Plus, the stock price is so low that I think a lot of Yahoos would welcome a big change, if for nothing else then to boost their portfolio.

At the very least I'd be interested to see how Microsoft could integrate such a huge company properly. I had discussed the idea 6 months ago when the rumor began to surface, the big question (if it happens) is how the two cultures and systems would merge...I think it would take years before they would actually operate as one company.

alaskamiller2• 18 years ago

It's simple. Half of you will all be fired and Yahoo will merge with MSN to create a monstrosity web division. The overlap in web products will create 3 tiers of service, the windows-ized integrated Live products (Live Mail, Live Search), the consumer centric Yahoo products (Yahoo Mail, Yahoo Search), and the pro-sumer products (Inktomi Search, Flickr, Delicious). This will be so confusing and stupid that after 2 or 3 years of Google eating their lunch they're fire the rest of the Yahoo staff and shutter off the Yahoo branded products in favor of the Live products.

But also, let's not kid ourselves, Microsoft could give two shits about Flickr. What they really want is Yahoo/Overture/Panama or whatever. That's the expected growth and cash cow that makes this deal possible.

davidw2• 18 years ago

I wonder if anything has changed since the days of hotmail. I recall everyone gloating over all the trouble they had trying to move that from FreeBSD to NT. IIRC, Yahoo does not use a lot of MS products on their servers... maybe I'm wrong, or maybe MS will be less insistent about pissing away lots of time transitioning to their tech?

damon• 18 years ago

Microsoft is still dead.

ardit332• 18 years ago

naw, they are the 1600lb gorrilla now. No matter how incompetent they are, they have enough momentum and cash to just smash thru obstacles (either buy or try to fail other startups).

axod• 18 years ago

Reminds me of myself and my brother playing monopoly as kids. He suggested he start with all the property, and I start with all the money.

I was young... 6 maybe, so I thought wow yeah heh I'll take all the money.

Sure, MS have cash from their dying desktop, but they still can't build web apps, or compete with google online. I'd say yahoo are almost as bad.

ardit332• 18 years ago

Holly... For some reason I imagine MSFT as the big borg spaceship coming close and just swalloing this smaller ship called yahoo, and casting a large shadow into google and the whole valley area.

papersmith• 18 years ago

I think it's more like dreadnoughts vs. a F-16.

DarrenStuart2• 18 years ago

its a good deal for stockholders I think. If you read the hype Yahoo is not doing to great(which I find hard to believe as they make a load of cash).

I think the combined search powers could be really good.

joeguilmette4• 18 years ago

http://finance.google.com/finance?fstype=ii&q=NASDAQ:YHO...

take a look at the annual data. they may be profitable, but a 62% fall in net income over 3 years, that's pretty bad.

DarrenStuart2• 18 years ago

yeah good point but they are not losing money and I think you will see google do the same thing in a few years once they hit the peak for their products.

Yahoo's problem seems to be the management and the fact they are still playing catch up with adsense.

wallflower• 18 years ago

It's easy to cheer on Google, as Google as they systematically takes on established vertical markets (to sell advertising) and do fairly well in some of them. Why not root for the underdog, Yahoo + MSFT?

dkokelley• 18 years ago

I can't be certain but I think you're being sarcastic :P

The reason is because Google WAS the underdog. Yahoo and Microsoft were the established giants. After 5 years or so the situation has almost reversed, though, with Google making (and buying) the killer apps and the other two players stuck in a game of follow the leader.

In 2007, Microsoft's net income was: $14 Billion. Yahoo's net income was: $660 Million. Google's net income was: $3 Billion.

Xichekolas5• 18 years ago

Because it's fun to cheer on the underdog if the underdog is better and the established players are just bumbling idiots holding down the underdog via cheating and uncompetitive strategies.

Trying to claim that YHOO/MSFT is (technically) better than Google and that Google is just a bumbling idiot trying to hold down YHOO/MSFT via cheating and uncompetitive practices is a bit of a stretch, even for the seriously deluded among us.

chaostheory• 18 years ago

crap... given MS's history with standards, I should switch from yui's css framework to another one if the bid goes through

agotterer• 18 years ago

Think they will move everything to MS servers and re-write in .net?! heh

bayareaguy2• 18 years ago

Not if they actually care about ROI. They got no benefit other than PR when they moved Hotmail to windows.

some• 18 years ago

How could an offer, that is 62% higher then the price at the stockmarket be refused?

food79• 18 years ago

Stock prices are weird. The current value is where half the people think the price is too low and half the people think the price is too high. Of course everyone who still has Yahoo stock think that the price is too low--because everyone who thinks the price is too high has already sold their shares.

So everyone who still holds any given stock thinks that the market price is too low.

Xichekolas5• 18 years ago

A simpler explanation is that everyone holding a stock wants it to go up so they can profit. When it goes up to a point where they don't think it's too low, they sell it, and hence no longer own it. So everyone that owns a stock thinks it's too low.

anewaccountname4• 18 years ago

>So everyone who still holds any given stock thinks that the market price is too low.

Only true in a limited sense. For instance, a majority holding the stock up until today might have just thought that the market price was way too high for how the company is performing, but that the presence of one or more misguided, irrational, drowing-in-money, potential aquirers out there meant that there was a large chance they might get a large upside off one of the fools--turns out they were right =).

ChaitanyaSai• 18 years ago

Some seemingly minor issues make me wonder how bad a situation Yahoo is in. Google has integrated their messenger into chat well enough that you can search through chats, grouped separately, as well as send messages of either kind to people you have contacted through chat or email. This makes a whole lot of sense, and I would think is relatively easy to accomplish. However, Yahoo's messenger is a bloated spam attracting monstrosity that seems like an estranged sibling to Yahoo's equally hideous email service; all the distressing genetic similarities but no conversation. Now how can a company that couldn't integrate two obvious candidates from their own bundle of services do in Microsoft, which isn't any better at integrating its own cluster? I don't see synergy.

dean4• 18 years ago

You don't have to read much of the business literature to discover that mergers and acquisitions, especially at this scale, rarely produce the expected synergies. All in all, I think this is good news for Google.

hugh• 18 years ago

This could be good news for startups. Suggested business plan:

1. Find something Yahoo currently does well (e.g. flickr)

2. Make a clone of it.

3. Wait for Microsoft to ruin the original.

michaelneale2• 18 years ago

You jest, but seriously that makes sense.

Heck you could SAY that it "replaces" Microsoft Flickr, and that would be perfectly valid !

I think it is indeed a happy day for startups.

doubleplus• 18 years ago

Grr. I just interviewed for a position at Yahoo on Wednesday.

cawel• 18 years ago

The Economist's take a it: http://www.economist.com/daily/news/displaystory.cfm?story_i...

"Microsoft is desperate to grab a bigger share of the online-advertising market because many of its software products are being challenged by free, advertising-supported services offered by Google. The company is also worried that Google's dominance in search and advertising allows it to dictate terms to advertisers, and gives it an unfair advantage over its smaller rivals."

Tichy• 18 years ago

I for one think it is a good idea. Maybe with Microsoft's start page, Yahoo search could get more traffic and the recognition it deserves. Microsoft Online Services could be scraped completely, nobody would miss them.

Server tech would be a concern, but who knows - perhaps rather than switching everything to Windows servers, Microsoft might take the chance to become acquainted with Linux and BSD. It would make sense if MS would in the future simply release a theme for Gnome, rather than waste resources on another OS that nobody wants.

mark-t• 18 years ago

It's just occurred to me that I'll have to switch my domain name registrar if this happens. Damn.

Microsoft bids $44.6 billion for Yahoo

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