Yahoo! Money to be made? - by khanan
Yahoo! vs. Microsoft Chess Game
Everyone is looking at the spectacular news of Microsoft walking away from the Yahoo! deal. Some really interesting articles I've encountered are by Marc Andreessen:
http://blog.pmarca.com/2008/05/examining-micro.html
This talks in great depth about the risks associated with such a large acquisition. Especially with regulators.
Other CEOs have expressed what was Microsoft thinking? Why offer $31 per share when the stock was trading at $19.1? At a 40% premium, Microsoft could of offered $27 per share and would have room to negotiate.
It's super interesting how each side makes their move. Now that Microsoft walked away, the carefully crafted email to Yahoo's management/board talks all about the shareholder value that Yahoo! lost. Will be interesting to see how the shareholders respond and what effect that will have on the Yahoo! stock price. I think this makes the most strategic sense, as going hostile by Microsoft would undermine an already declining morale at Yahoo!. When Steve Ballmer says to his employees that Microsoft will build out their own Internet strategy to compete with the likes of Google - I don't buy that either. How long will it take them to accomplish the massive scale Yahoo! offers?
It appears that many Internet entrepreneurs have been in favor of this deal - including myself. There is way too much dependence on Google. Yahoo! has not been effective in competing with Google advertising capabilities, especially when going overseas. Many times the Yahoo! software does not match from country to country, and this makes having a consistent marketing strategy difficult. Google has realized this flaw and have executed very well on it. Having Microsoft/Yahoo combination would potentially solve this problem.
In my view, from these events we know Yahoo! has a strong offering and considering there was a buyer for $33 per share, shall the stock dip below what it was trading during the time the offer was made, I think it makes an attractive long term investment.
What are your thoughts?