Published: Saturday, October 11, 2008
Collapse may make Yahoo ripe for the picking
SEATTLE -- When Yahoo Inc. co-founder and CEO Jerry Yang spurned Microsoft Corp.'s rich buyout offer this spring, he promised brighter days in Sunnyvale, Calif., were just over the horizon.
Now the market collapse has helped drive Yahoo's value to a fraction of what Microsoft originally bid. If Microsoft -- or another buyer -- were to float a new offer, the acquisition would come much cheaper, and Yahoo would likely be under even greater pressure to take it.
Matt Rosoff, an analyst for the independent research group Directions on Microsoft, said Microsoft is much less likely to bid for all of Yahoo this time. Its search engine, No. 2 to Google Inc.'s, would likely be Microsoft's target.
Rosoff said Yahoo's pummeled stock price leaves time on Microsoft's side. The company can afford to throw money into its own Internet search operations and swoop in when Yahoo is finally strapped.
"I think they're looking at Yahoo as a rapidly declining asset," he said.
On Feb. 1, Microsoft tried to buy Yahoo for $31 per share, or $44.6 billion at the time, with cash and stock. The offer marked a 62 percent premium to Yahoo's closing price of $19.18 the day before.
Microsoft later sweetened its bid to $33 per share, or $47.5 billion -- an amount Yang and board chairman Roy Bostock said in May still undervalued Yahoo.
Since then, Yahoo's share price has been halved and analysts are seeing few bright spots as they slash expectations for Web display advertising, Yahoo's strength, in the coming quarters.
Microsoft's stock has been battered as well, but even at the shares' current level, Microsoft's original stock-and-cash bid for Yahoo would be worth about $37.1 billion to Yahoo shareholders. That's more twice Yahoo's current market value.
Now the market collapse has helped drive Yahoo's value to a fraction of what Microsoft originally bid. If Microsoft -- or another buyer -- were to float a new offer, the acquisition would come much cheaper, and Yahoo would likely be under even greater pressure to take it.
Matt Rosoff, an analyst for the independent research group Directions on Microsoft, said Microsoft is much less likely to bid for all of Yahoo this time. Its search engine, No. 2 to Google Inc.'s, would likely be Microsoft's target.
Rosoff said Yahoo's pummeled stock price leaves time on Microsoft's side. The company can afford to throw money into its own Internet search operations and swoop in when Yahoo is finally strapped.
"I think they're looking at Yahoo as a rapidly declining asset," he said.
On Feb. 1, Microsoft tried to buy Yahoo for $31 per share, or $44.6 billion at the time, with cash and stock. The offer marked a 62 percent premium to Yahoo's closing price of $19.18 the day before.
Microsoft later sweetened its bid to $33 per share, or $47.5 billion -- an amount Yang and board chairman Roy Bostock said in May still undervalued Yahoo.
Since then, Yahoo's share price has been halved and analysts are seeing few bright spots as they slash expectations for Web display advertising, Yahoo's strength, in the coming quarters.
Microsoft's stock has been battered as well, but even at the shares' current level, Microsoft's original stock-and-cash bid for Yahoo would be worth about $37.1 billion to Yahoo shareholders. That's more twice Yahoo's current market value.
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