Author Topic: Microsoft Offers $44.6B for Yahoo  (Read 3371 times)

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Offline pmp6nl

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Microsoft Offers $44.6B for Yahoo
« on: February 01, 2008, 11:18:55 AM »
Quote
Microsoft Offers $44.6B for Yahoo
Friday February 1, 10:40 am ET
By Michael Liedtke, AP Business Writer
Microsoft Makes Unexpected $44.6B Bid for Yahoo; Internet Icon Is Studying It

SAN FRANCISCO (AP) -- Microsoft Corp. has pounced on slumping Internet icon Yahoo Inc. with an unsolicited takeover offer of $44.6 billion in its boldest bid yet to challenge Google Inc.'s dominance of the lucrative online search and advertising markets. The Justice Department says it is interested in reviewing antitrust issues associated with it.

The surprise offer of $31 per share, made late Thursday and announced Friday, seizes on Yahoo's weakness while Microsoft tries to muscle up in a high-stakes battle with Google likely to define the technology landscape for years to come.

In a statement Friday, Yahoo said it will "carefully and promptly" study Microsoft's bid.

With its profits steadily sliding, Yahoo's stock slipped to a four-year low earlier this week and a new management team has been trying to steer a turnaround but sees more turbulence through 2008.

The announcement lifted Yahoo's share price by almost 50 percent in morning trading, while Google fell almost 8 percent, dragged down by a fourth-quarter earnings report that missed Wall Street expectations.

In conference call Friday morning, Microsoft Chief Executive Steve Ballmer indicated he won't take no for an answer after Yahoo rebuffed takeover overtures a year ago.

"This is a decision we have -- and I have -- thought long and hard about," Ballmer said. "We are confident it's the right path for Microsoft and Yahoo."

To underscore its resolve, Microsoft is offering a 62 percent premium to Yahoo's closing stock price Thursday. If the deal is consummated, it would be by far the largest acquisition in Microsoft's history, eclipsing last year's $6 billion purchase of online ad service aQuantive.

Since reaching a 52-week high of $34.08 in October, Yahoo shares have fallen 46 percent. Yahoo climbed $9.41 a share, or 49 percent, to $28.59 in morning trading. Microsoft shares fell $1.43, or 4.4 percent, to $31.17.

Microsoft publicly disclosed its cash-and-stock offer in hopes of rallying support from Yahoo's shareholders, making it more difficult for Yahoo's board to turn down the bid.

In a letter released Friday, Ballmer pointedly noted Yahoo's financial performance has deteriorated since Microsoft was spurned a year ago. At that time, Ballmer said he was told Yahoo believed it was better off on its own.

"A year has gone by, and the competitive situation has not improved," Ballmer wrote in his letter.

Microsoft's previous offer was rebuffed by Terry Semel, who stepped aside last year as chief executive under shareholder pressure.

Microsoft sent its latest takeover offer to Yahoo late Thursday, shortly after Semel resigned as the company's chairman. The letter is addressed to Semel's successors, new Chairman Roy Bostock and the current CEO, co-founder Jerry Yang, who is one of Yahoo's largest shareholders.

In a prepared statement, Yahoo said its board "will evaluate this proposal carefully and promptly in the context of Yahoo's strategic plans and pursue the best course of action to maximize long-term value for shareholders."

Microsoft views Yahoo as its best chance to thwart Google, which has leveraged its leadership in Internet search and advertising to emerge as an increasingly serious threat to the world's largest software maker's persuasive influence on how people interact with computers.

Google already controls nearly 60 percent of the U.S. search market, and has been widening its lead, despite concerted efforts by both second-place Yahoo and third-place Microsoft. By combining, Microsoft and Yahoo would have a 33 percent share of the U.S. search market, according to the latest data from comScore Media Metrix.

By joining forces, Microsoft and Yahoo also would widen their narrowing advantage over Google in providing free e-mail accounts -- a service that helps foster more loyalty with users and create more advertising opportunities.

Advertisers around the world are expected to double their spending on the Internet during the next three years as more people get their news and entertainment on the Web instead of television, radio, newspapers and magazine. The trend is expected to create an $80 billion online ad market in 2010, up from an estimated $40 billion last year.

Despite an aggressive push in recent years, Microsoft's online advertising expansion hasn't paid off. Last week, the Redmond, Wash.-based company reported a 79 percent jump in its overall profit, but its online division's loss widened to $245 million.

And Yahoo has been struggling to attract more advertising even though its Web site attracts one of the biggest audiences. The Sunnyvale-based company's profit has declined for five consecutive quarters, prompting plans to cut 1,000 jobs later this month, a 7 percent reduction of its 14,300-employee work force.

Besides helping to boost its online ad revenue, Microsoft believes it could mine more profit from Yahoo by jettisoning workers and eliminating overlapping operations.

Microsoft said it sees at least $1 billion in cost savings if it buys Yahoo. Microsoft executives deflected questions about how many jobs might be lost, but the company emphasized retention packages will be offered to Yahoo engineers and other key employees, including some executives.

The fate of Yahoo's brand also is unclear if Microsoft takes over. Both Ballmer and Kevin Johnson, president of Microsoft's platforms and services division, hailed Yahoo's strong brand value but didn't commit to keeping the name alive.

AP Business Writer Jennifer Malloy in New York and AP Business Writer Jessica Mintz in Seattle contributed to this story.

http://biz.yahoo.com/ap/080201/microsoft_yahoo.html
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Offline ajekt

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Re: Microsoft Offers $44.6B for Yahoo
« Reply #1 on: February 01, 2008, 02:20:42 PM »
Oh great :(
N-D-S-U ... Goooooo Bison!

Offline pmp6nl

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Re: Microsoft Offers $44.6B for Yahoo
« Reply #2 on: February 09, 2008, 01:30:58 PM »
Yahoo said no!

I guess before they even consider it they want $12 billion more... $56 billion anyone.

Microsoft would issue dept, other companies dont have enough money (to spend)?

Quote
Yahoo to Reject Microsoft Bid: Reports
Yahoo! Finance

In a bid to remain independent, Yahoo plans to reject Microsoft Corp.’s unsolicited takeover offer, according to reports on the Wall Street Journal’s web site.

Quoting sources familiar with the situation, the Journal reports that Yahoo’s board feels the offer of $31 per share “massively undervalues” the company. A letter spelling out the position is expected to be sent Monday. Yahoo also expressed concern that Microsoft’s offer does not account for risks to Yahoo should the deal be overturned by regulators.

The Journal source said the company would be unwilling to consider an offer below $40 per share, which would represent a $12 billion increase over Microsoft’s original $44.6 billion bid. It is unclear if Microsoft would be willing to increase its bid by such a significant amount.

A Yahoo representative said the company would not comment on rumor or speculation and reiterated that the board is evaluating all its strategic options.

The two companies have been in discussions about an alliance or merger for more than a year. Yahoo has long hoped to remain independent, believing it can reverse its fortunes and lift its flagging stock price.

In the summer of 2007, investors believed it was possible as well. Yahoo co-founder Jerry Yang replaced Terry Semel as CEO and announced he would unveil a new strategic plan for the company within 100 days.

“There will be no sacred cows and we need to move quickly,” he said. But, after the 100 days – and then some – passed, investor patience wore thin, driving the stock lower.

In late January, the slumping Internet pioneer reported a fifth-consecutive quarter of lower profits and warned of “headwinds” for 2008. Yahoo’s battered stock fell to a four-year low, below the $20 per share level, and Microsoft pounced.

Yahoo shares are currently 51 percent above their pre-bid value. In contrast, Microsoft shares have dropped about 13 percent since the bid was announced, far worse than the Standard & Poor’s 500’s loss of 4 percent.

The second-guessing about Microsoft's unsolicited bid is typical for large acquisitions. Investors are debating whether the benefits outweigh the potential management distractions, sagging employee morale and other headaches that can arise after the deal is done.

Should Microsoft decide to increase its offer, it could still turn up the pressure by drawing upon its $21 billion in cash and lofty market value of $265 billion to raise the bid.

Microsoft Chief Financial Officer Chris Liddell said the software company may issue some debt to finance the cash portion of its 50-50 stock and cash offer for Yahoo, instead of drawing down its entire $21 billion cash pile.

"It's likely we're actually going to borrow for the first time," said Liddell in an annual strategy meeting with analysts before Yahoo’s apparent decision. "It's going to be a mixture of the cash we have on hand plus debt.”

Since Microsoft’s initial bid, there has been a significant amount of discussion about antitrust concerns. Google’s chief legal officer David Drummond, writing on the company’s blog, said “Microsoft's hostile bid for Yahoo raises troubling questions. This is about more than simply a financial transaction, one company taking over another. It's about preserving the underlying principles of the Internet: openness and innovation."

Microsoft made similar comments when Google CEO Eric Schmidt reached out to Yahoo about a potential partnership following the bid.
While some investors held out hope for a white knight bidder, none surfaced after Microsoft’s initial bid. News Corp. CEO Rupert Murdoch ruled out a bid during a Feb. 4 conference call. Other potential suitors, such as Comcast and AT&T, opted against going against Microsoft’s deep pockets, as well.

Additional reporting by the Associated Press and Reuters
http://biz.yahoo.com/special/release020808.html
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