Yahoo To Reject Microsoft Bid

Many outlets are echoing a subscribers-only report in the Wall Street Journal that Yahoo's board has decided to reject Microsoft's takeover offer. The NYTimes offers the only other independent reporting so far confirming this claim. The report says that Yahoo will formally reject the offer in a letter on Monday, since they believe it "massively undervalues" the company. Microsoft offered $31 per share, a 62% premium on the stock price at the time, for Yahoo; but the latter believes that no offer below $40 per share is tenable. The AP has some background on Yahoo's options in responding to the bid.

In other news...

[FlyByPC (841016)]

Redmond weather reports are predicting thunderstorms, with a 90% chance of scattered chair showers.

Ballmer: "Google's not a real company..."

[Futurepower(R) (558542)]

There may be some Slashdot readers who don't know the story about the chair: Ballmer Throws A Chair At "F*ing Google" [battellemedia.com].

Quotes:

At that point, Mr. Ballmer picked up a chair and threw it across the room hitting a table in his office. Mr. Ballmer then said: "Fucking Eric Schmidt is a fucking pussy. I'm going to fucking bury that guy, I have done it before, and I will do it again. I'm going to fucking kill Google." ....

Thereafter, Mr. Ballmer resumed trying to persuade me to stay... Among other things, Mr. Ballmer told me that "Google's not a real company. It's a house of cards."

Quoted from legal papers in a court case brought by Microsoft.

Re:Ballmer: "Google's not a real company..."

[dotancohen (1015143)]

Of course Google is not a real company. If Google was a real company, then Steve wouldn't be buying their competitor. They'd be buying Google.

Re:Ballmer: "Google's not a real company..."

[rtb61 (674572)]

The catch with that logic is it was not a 100% cash offer. It was a 50% cash and 50% M$ stock offer, now attempting to dump $22.3 billion dollars worth of M$ stock would mean in effect a substantial collapse in the purchase offer as the M$ stock price collapsed. After all M$ already took a substantial negative hit as soon as M$ admitted defeat in the Internet marketplace and was forced to make the offer to buy Yahoo.

While the yahoo board would obviously be tempted with a cash only offer, getting stuck with M$ stock at this time would be nothing the Yahoo board could, in all good conscience, recommend to its share holders. Oddly enough, a substantial portion of the rise in Yahoo share price that resulted from M$'s bid will remain because of M$ admission of defeat in the Internet market place, simultaneously that admission of defeat does not bode well for M$.

Re:Ballmer: "Google's not a real company..."

[timmarhy (659436)]

Ballmer is correct to an extent - google and yahoo ARE a house of cards, completely reliant on the fickle advertising market and pumped up share prices.

yahoo shows this in their insane logic that shares in their company are worth 2x what they are selling for in the market.

Re:Ballmer: "Google's not a real company..."

[HUADPE (903765)]

Buyout offers are consistently above market prices, consider the following.

1/2 of 1% of a company's outstanding shares being traded in a given day is a VERY high volume. This means that even on a big news day, well over 99% of shareholders still think owning the stock is a good idea. They value it therefore at some amount higher than the going price.

In order to get these people to sell to a buyout offer, you have to make it go from 1/2 of 1% thinking that they should sell to 50%+1. To convince all the shareholders between .5% and 50.0000001% to sell means you have to raise the price, substantially.

Re:Ballmer: "Google's not a real company..."

[c (8461)]

> Ballmer is correct to an extent - google and yahoo ARE a house of
> cards, completely reliant on the fickle advertising market and pumped
> up share prices.

This would be the same market Ballmer proposes to run Microsoft into debt in order to buy into?

c.

Re:Ballmer: "Google's not a real company..."

[Comatose51 (687974)]

Good luck using the Internet and its vast store of information without Google or Yahoo! or any decent search engine. What are we going to do instead? Use Gopher? Google is what makes the Internet accessible to people. There's a TON of value in that alone. I realized the other day that instead of buying a book, doing traditional research, etc. I usually just Google for an answer when I have a technical problem. Do you realize the immense value in that? If Google suddenly started charging for search, I would pay for it. The search engine is a vital part of the Internet or any vast collection of information.

Any tech company can be called a "house of cards". After all, what real assets do they own other than some buildings and equipment? The value of a tech company isn't measure that way. The foundation is the people they have and the talent pool they can draw from. Google has an immense talent pool that has shown itself being capable of solving many, many problems that bring value to people's lives. Advertising is just one avenue they use to monetize that value.

Re:Ballmer: "Google's not a real company..."

[Surt (22457)]

There are at least 3 search engines with quality competitive to google that are not yahoo.
If google started charging for search, would you seriously not investigate the nearly equally good alternatives?

Re:Ballmer: "Google's not a real company..."

[ScrewMaster (602015)]

Sure he would ... he's just saying that Google has value, that's all. And I agree: no library is of much use without an index.

Re:Ballmer: "Google's not a real company..."

[by Anonymous Coward]

"completely reliant on the fickle advertising market"

When is somebody going to step back and look at this phrase? Yeah, come to think of it, every media format on Earth, from newspapers to radio stations to magazines to TV stations, has companies that are completely reliant on the fickle advertising market. Been going on for 200 years+ of American capitalism; I don't see it stalling any time soon.

Re:Ballmer: "Google's not a real company..."

[liam193 (571414)]

The majority of users don't hate advertising, they hate the advertising they have been given. Google is a unique company on the net; their success is largely due to the fact that there is not a concentrated effort to remove their advertisements at all costs. Why? There is a perception by the users that Google's advertisements are not intrusive and annoying. So what's special about Google's advertising methodology:

• They don't use images - Advertisements that uses images, and in particular large flashing animate images, on a web page speaks the following to me:
  
  • The organization believes I am too stupid to read their single line entry telling me about their product.
  • The organization doesn't value my time because they are using their advertisement not simply to compliment my experience, but they are trying at all costs to waste my time in finding the information that they pushed off the page with their advertisement.
  • I do not want to do business with this organization ever. In fact, I might want to take note of their name and consider using a competitor who hasn't shown this disregard for their customer's time.
  
  
• Most, if not all, of the advertisements are in some way related to what I am viewing.
  
  • I am out there searching for a news article on a recent event and having the main advertisement tell me about a new medicine for something.
  • The advertisements are only slightly different from the search results (shaded background) and may actually be a valid choice for what I'm trying to find.
  
  
• The front page doesn't have advertisements. If you are a search company, your front page should be a search page. It shouldn't have a ton of news and advertisements on it. If I want news, I will click on a news link or go to news.whatever.com. I don't need a page like www.yahoo.com that during network slowness is going to take time to load.

Re:Ballmer: "Google's not a real company..."

[hostyle (773991)]

An entrenched monopoly on x86 Operating Systems where the likes of Dell must bend over and sign their souls away and the industry leading Office Suite?

Of course it's not a "real" company...

[BattyMan (21874)]

If it were a "real" company, like, say, Netscape (was), the Empire could cut off its air supply. Same with "Linux" (_not_ a "real company", doesn't need to make money or stay "in business" in order to survive and continue to challenge The Monopoly). "Real Companies"(tm)(r)(c) can be eliminated using "real" monopoly business abuse. This is what _really_ has SteveB pissed off and frustrated to the point where he's reduced to swearing and throwing things.

He has viable competitors out here, about which he can't do a fsckin' thing.

Oh, and _zero_ market loyalty, after ten years of abuse. Make that negative numbers...

Re:

[ScrewMaster (602015)]

after ten years of abuse

Ten years? Try thirty.

TEN years of abuse?

[toby (759)]

Somebody can't count.

MS was a customer hostile enterprise (eventually proved criminal, time and time again) from the day Gates crawled out of bed and set it up in 1975, with mission: Enrich ME, fuck everyone else. (Remember the anti-hobbyist memo [wikipedia.org] (first of many famous incriminating memos)? [google.ca] The leopard doesn't change its spots.)

I make that 32 years. The cost to civilisation is incalculable, and we'll be paying for decades to come. Millions of lives are made worse by Windows and every other worthless MS product, every day.

Ballmer was hired and retained to continue the disgusting legacy.

Frankly, my dear, I don't give a damn.

[westlake (615356)]

There may be some Slashdot readers who don't know the story about the chair

--- and a good many more who wish the joke could be retired along with the other long-since-gone-stale running gags that pass for humor on Slashdot.

Re:

[dpninerSLASH (969464)]

From all accounts it seems as though Yahoo! is afraid of Microsoft, as they should be.

Right now they've got Steve Ballmer in a corner. This is a man who is driven to win at all costs. Despite the flury of lawyers and PR folks advising against a hostile take over, I can't see him backing down. His identity and authority is too closely linked to his gratification.

Yahoo has no choice but to try to work out some sort of partnership with Google, if only for its own survival. Fortunately, I do not se

Re:

[by Anonymous Coward]

Because falling chairs hurt.

Good to have more search engines

[Besna (1175279)]

As much as we all love Google, I think there needs to be a variety of search engines. Microsoft-Yahoo might have been a bigger player, but we'd lose the variety. Ask.com almost doesn't count.

What happens next

[Dr Kool, PhD (173800)]

Either:

1. Microsoft ups their offer. Yahoo board indicated they wouldn't consider anything under $40.

2. Microsoft walks away. Shareholders revolt after stock drops big time.

3. Microsoft wages a proxy fight and tries to win over shareholders over the board's head.

(3) is the most likely outcome. Microsoft already said something like "we won't take no for an answer".

My bet...

[Xenographic (557057)]

(4) Their bid is denied thanks to EU anti-trust regulators, but they manage to cause havoc for Yahoo anyhow by distorting their stock price.

Re:What happens next

[kripkenstein (913150)]

2. Microsoft walks away. Shareholders revolt after stock drops big time.

You know, the paranoid in me thought that this might be Microsoft's strategy all along.

Surely Ballmer knows many/most Yahoo! engineers aren't happy with the idea of being Microsoft employees (even if they do endure it, they won't do so happily, which affects productivity). Also most/all of Yahoo! is built using tools not easily integrated into Microsoft's (but this could be mitigated with a slow integration process). So the actual value of Yahoo! for Microsoft isn't all that great. Is this worth wiping out all of Microsoft's war chest and going into debt to boot? I doubt it.

Instead, imagine what would happen if Yahoo! vanished overnight. Yahoo! users would migrate either into Google services or Microsoft ones. Ballmer might believe that he can woo the majority of them; even if not, it still raises Microsoft's market share, even if while doing so it does the same for Google. And this might be achievable by doing exactly what Ballmer is doing: getting Yahoo! directors (and employees) to fight with Yahoo! stockholders. Yes, it might not wipe out Yahoo! overnight, but as a consequence the stock might topple downwards, and who knows what might happen then - the board might get replaced, internal turmoil, etc. etc. Even if it doesn't kill Yahoo!, it might make it less competitive, again, something that is good for Microsoft.

Idiots

[Tanman (90298)]

Their P/E is 62. *SIXTY-TWO*

That means they don't make money. At least not compared to the already-inflated value of their stock. The value of their shares should be down in the single digits right now based on their income -- a P/E from 15-20 would be much more reasonable. Microsoft comes along and offers to buy them out for an amazing amount of money, and they turn it down?

Refusing this deal borders on illegal, assuming their job is to act in the interests of their shareholders.

Re:Idiots

[Frosty Piss (770223)]

Refusing this deal borders on illegal, assuming their job is to act in the interests of their shareholders.

Instant profit is not always in the long term benifit if it comes along with total destruction of the company. And who says short term profit is what Yahoo!'s shareholders want?

Re:Idiots

[Tanman (90298)]

Long-term benefit? Excuse me?

We are talking about a deal that instantly infuses into the Yahoo shareholders' bank accounts more money than the company would earn in 20 years. It IS long-term benefit, and they ARE idiots to reject it.

Insiders think it is worth $40? Who the hell are they fooling? Themselves, obviously.

Re:

[Mikachu (972457)]

Well, it looks like we'll find out what the shareholders want soon enough. Since Microsoft doesn't look like they're taking no for an answer, my guess is that they're going to try and win the shareholders over without even bothering with Yahoo's board.

It was always going to happen

[MLCT (1148749)]

Yahoo would have been daft to accept as it was. The position they have taken (if correct) is the obvious line - "massively undervalues". The ball is firmly back in MS's end of the court - they will be forced to put themselves into substantial debt trying to force a hostile takeover (aren't MS sharholders going to love that on - yeah go ahead and piss away our 19B cash pile for a failing company) - or give up on it and look like a coward. Ballmer always likes to play the big man - it will be interesting to see how big he reacts to this. Depending on how obsessed he is about getting his own way this could end up making the AOL Time Warner debacle look like a minor business misdemeanour decision. 60B would be a out-of-thin-air figure I could see this ending up at - that would be absolutely hilarious.

The other main option, namely attempt a takeover by proxy by trying to fill the Yahoo board has now (broadly) been nullified. If the current board is taking a position that will (if the takeover happens) make YH shareholders more money then they are not going to vote on MS stooges who would immediately accept the MS offer.

Re:

[Hangtime (19526)]

This thing is not going down for $45 a share (60 billion). This is going down for $34 - $35. MSFT might be loaded but they will not go all the way to the mat. If MSFT makes a $35 offer and its not accepted...Microsoft won't have to wage a proxy fight, YHOO instititutional shareholders will do it for them. Yang and the board own like less then 6% of the company. While YHOO may point back to its high $35 price in November...a whole lot of stocks were high in November and tech is out of favor right now. MSFT b

Buying Yahoo will not make Microsoft smarter.

[Futurepower(R) (558542)]

It's possible to learn a lot by examining the world around you. For example, what am I bid for this half-eaten, moldy burrito? I am accepting no offers below $40.

Microsoft has proven, over many years, that it does not know how to run a search engine. Buying Yahoo will not magically make Microsoft smarter, especially since Yahoo has proven, over many years, that...

Well, that took long enough..

[dynamo (6127)]

Most of Yahoo's value spawns from how *completely* different their company attitude comes across from stuck-up, self-important, dying companies such as microsoft.

This is backwards. Give it five or ten years, and Yahoo could be buying microsoft (and not just because Yahoo's value is going up.)

But Yahoo's value would plummet by at least 75%, according to my completly random guess, if it were a division of MS. Imagine if your yahoo mail account was suddenly an MSN account. Your Yahoo IM suddenly merges with MSN. They both become worse than trash - I cannot imagine an organization (aside from the current executive branch of the us government) that I trust less than microsoft - all incompetence aside.

If they were people, I would invite Yahoo over to a backdoor bbq. MS, on the other hand, I'd invite to.. nowhere.

- d

Re:

[owlnation (858981)]

While I don't disagree that Microsoft is in a slow downward spiral. I'm not sure I understand the rest of your post.

Yahoo has sharks circling. This is because it's dying much faster than MS. Yahoo, is essentially an empty brand name, content, and a database -- i.e. just like AOL before it. It has executives who have never understood its client base, nor cared for one single second long enough to find out what they want. It is astonishing that it survived the 1st dotcom crash -- it was in trouble then. Ev

Re:Well, that took long enough..

[doktor-hladnjak (650513)]

Yup, it's true--Microsoft is dying [engadget.com].

This is done

[Hangtime (19526)]

YHOO board comes out against, MSFT will rail that YHOO isn't worth that much, a month from now MSFT will offer a sweetened offer - call it $34 and propose its own slate of directors for the annual meeting. YHOO board will accept because they don't have a choice. MSFT will complete the purchase Jerry Yang and his cronies will go back to the bars in the Valley start their own venture capital firms or become part of one of the VCs like Kleiner-Perkins. Deal closes in the 4th quarter.

Thank God.

[F34nor (321515)]

As a share holder in Microsoft I think that Microsoft has way better things to do with my retained earnings than pay too much for nothing right before the whole economy tanks.

He's an idea. Sell you stupid DRM pipe dreams down the river of wasted time and turn into what you should be, a DIVIDEND paying LOW GROWTH utility company. Make a good operating system with no bells or whistles that will pass any anti-trust case, sell it for a low enough price that the trouble of downloading a bit torrent crack isn't worth it. Make it so I can add/remove modules over the Internet at will for low low prices. Then make a a version that looks fucking fantastic and sell it like a Mac for a premium to fanboys and people who think translucent colored baubles are the shit.

Someone over there has finally woken up. I have been teaching Office 2007 and for god's sake it's a great product. 90% of the things that have made want to skull fuck the assholes in the Office department to death are gone. The menu system is great. The Page layout break controls are great. The automatic formating is now controllable. Best of fucking all you can now set the default action for paste to be text only.

I want Microsoft to stop being a bitch like Sony. (Don't FUCKING sue yourself.) Don't get delusions of being a media company or and Internet company you twits. Give me my fucking retained earnings as a dividend, make Office for a profit, make Server for a large profit, and make Windows so it works underwater in space, in the future, across standards, platforms, without a hoot because it is a god damn utility that doesn't give a fuck because everyone has to use it and doesn't hate it because it just fucking does its job come hell or high water.

I agree

[OMNIpotusCOM (1230884)]

The only thing the parent needs is some cool, blue, semi-translucent baubles and a Star Trek reference.

Re:Thank God.

[Mspangler (770054)]

Dogbert's strategy comes to mind.

Make a bid, which is rejected.
Generate a massive amount of negative media buzz, causing the stock price to fall.
Repeat the original bid "I offer $31 for your company", which is now accepted with relief "$31 a share is more than fair."
Dogbert: "Yeah, $31 'a share' would have been fair." implying they just sold the entire company for $31,being too paniced to read the fine print.

We'll have to wait and see how this high-stakes corporate waltz plays out.

WTF?

[ohtani (154270)]

I don't get why people are bitching at Yahoo! over this. Do you WANT Microsoft to own them? I don't care WHY they turned it down, I'm just glad they did, I personally don't want to see it happen at all! I'm not even sure if the FTC would like it much.

It is compatibility problem really

[Ilgaz (86384)]

FreeBSD doesn't work well with Windows. It is not a joke. If it worked (or works) it could be a huge disaster for both companies. Yahoo buyout is not some "dotcom startup invented something, lets buy it" thing, 46 billion is a huge money even for Microsoft. They can't say "Oh it didn't work" and turn their backs.

Companies are not compatible with each other. Yahoo is a open source powered services giant. MS is Windows maker who struggles to make Windows more credible in large installations. Would MS pay $46 billion to further advertise open source technologies and operating systems like FreeBSD?

I suggest Slashdot people who thinks Yahoo is lame because of their homepage check http://developer.yahoo.com/ [yahoo.com] to see what Yahoo actually is.

Re:

[quanticle (843097)]

Would MS pay $46 billion to further advertise open source technologies and operating systems like FreeBSD?

No, but it might be worth $46 billion to destroy one of the larger installations of open source software out there, in addition to starving open source projects like Zimbra of corporate support.

It's called negotiation

[dreamchaser (49529)]

MS bid $31. Yahoo counters with "Not a penny under $40". MS counters with $35 or just does a hostile takeover.

Non search properties

[Tuor (9414)]

I find most discussion only focuses on search. Certainly this is part of Microsoft's strategy. What is more important for Yahoo! is it's other services. Yahoo! groups, mail, TV, calendars, widgets, and lots of other properties.

Is it possible Microsoft is after these? Like Palm wasn't after BeOS?

What would the acquisition of these other properties do for Microsoft? For Google? Google could sell the search and advertising off and get a lot of mileage off of the other parts

I think it's all this other IP that puts Yahoo! in a much better position then the narrow "Search Merger" view provides.

Re:

[downix (84795)]

You're ignoring, they're offering $31 "equivelent" in Microsoft stocks. Not in cash in hand. How will the stock market respond when suddenly there's this extra 20% in loose Microsoft stocks floating out there?

Hello stock price freefall!

$40 as a minimum is quite reasonable when you consider the massive devaluation which will occur the moment the deal goes through.

Re:Excuse me?

[Dr Kool, PhD (173800)]

That's simply wrong. The offer was $31 in cash OR 0.9509 of a share of Microsoft common stock.

Re:Excuse me?

[Pendersempai (625351)]

There's an equilibrium, though. When a large block of stock is sold, the price of the stock may drop momentarily, but then it is undervalued and hedge funds and mutual funds snap it up until it is back to where it was. This effect is born out empirically. The demand curve for a stock is extremely steep: if it drops even a dollar, everyone and his mother wants to buy, which pushes it back up to its equilibrium price.

The one exception is when insiders sell large blocks of stock -- then the market assumes there must be bad news coming, and the price does drop and remain low. But this effect is informational, and the magnitude of the drop has much less to do with how many shares are dumped onto the market than it does with what the dump says about the insider's opinions (e.g. what proportion of his stock he dumps, and how many other insiders do the same simultaneously).

In any case, the fact that there are "loose shares" dumped onto the market does not by itself affect the price.

Re:

[Frosty Piss (770223)]

Stock will fall even lower then the $19,18 it was at the moment of the hostile take over from MSFT...

Sure, or course. The circling money vultures who could not really care any less about Yahoo! or it's business will flee to other more tasty rotting Interweb meat. And Yahoo will live another day.

The problem with American business and the financial "industry" built around it is that there is actually no interest at all in sustainable business, but rather exponential profit growth at all cost, even the death o

Re:Not smart

[OakLEE (91103)]

The problem with American business and the financial "industry" built around it is that there is actually no interest at all in sustainable business, but rather exponential profit growth at all cost, even the death of the company itself. The company dies, the money vultures move on to the next target.

I challenge you to show how Yahoo is a sustainable business. Before the MS offer, they just announced that they would have to fire 1000 employees [google.com]. The company's revenues year over year are shrinking [nwsource.com] because their management cannot find a way to translate all of their site traffic into money. They have a history of failing to meet their own projections. At the very least this a poorly run company, and with the coming recession, I do not think its sustainability is out of the question.

Second as an individual that owns stock, and thus is one of these "money vultures," why should I or any investor want to own Yahoo's stock, outside of takeover speculation. The company offers no dividend, which means the only return on investment I will see in it is from the company's growth, something it has clearly failed to predict, manage, or deliver on.

You claim that the entire financial industry is built on "exponential growth" but you fail to ignore the fact that Yahoo abd most tech stocks choose to hold their stock out as a growth stock, meaning they can only justify their stock price by *gasp* growing. If Yahoo were too come out tomorrow, declare a dividend (like say Altria), and pay some of the $1.5 billion dollars in cash they have to their shareholders, than their stock would finally have some intrinsic worth NOT tied to their rate of growth. (Note: For an explaination of growth stocks vs. value stocks, check this link [axaonline.com] out.)

Re:

[earlymon (1116185)]

Not a criticism or flamebait, so please don't take it that way.

I have a yahoo account (don't really use it), but I primary think of them as a search engine. Used them until after google came along, but joined the pack.

So based on that, here's my question - _if_ Yahoo is a search engine, and _because_ you point how they're not a sustainable business, then perhaps the real deal is that your post has three links in it, none of them from Yahoo. In fact, you use google as the first link to find out / prove how

Re:

[OakLEE (91103)]

I'm going to get modded flaimbait for this but I don't care.

I'm poor. I make under $30k a year and live in Los Angeles. Yet despite that, I am able to save 25% of my income each year and invest it, some of it in oil stocks to help offset the cost of commuting. The problem in this country is not that poor people cannot save and cannot live a decent life, it's that they choose not to. They choose to have children before they can afford it. They choose not to take out loans to go to college. They choose

Re:

[phalse phace (454635)]

Shouldn't that be Yahoo! ?