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Shareholder Backs Yahoo!, Supports Independence

Posted by Zonk on Wed Apr 09, 2008 01:34 PM
from the settle-back-folks-going-to-take-a-while dept.
Businesses The Internet Yahoo! Technology
mikkl666 writes "In a follow-up to yesterday's story about the struggle between Microsoft and Yahoo!, major Yahoo! shareholder Legg Mason has announced that they are ready to back the company in their effort to keep out of Microsoft's grip. According to portfolio manager Bill Miller, 'the problem is Microsoft blundered with the letter this weekend. Telling the shareholders you're going to take something away from them is not a way to get their support'. Nevertheless, he believes Microsoft will end up paying what it takes to own Yahoo."
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[+] Yahoo! Rejects Microsoft's Offer, Says 'Still An Option' 213 comments
mikkl666 writes "In response to an open letter from Steve Ballmer, Yahoo! posted a press release claiming that Microsoft's offer 'substantially undervalues Yahoo!' and is therefore not in the best interest of the company. They also bemoan that the letter 'mischaracterizes the nature of our discussions' and that the threat to make an offer directly to the shareholders is 'counterproductive and inconsistent with the stated objective of a friendly transaction'. Nevertheless, they explicitly point out that a transaction with Microsoft is still an option, but only if they are willing to pay 'a price that fully recognizes the value of Yahoo!'"
Submission: Shareholder Backs Yahoo!, Supports Independence by mikkl666 (1264656)
[+] AOL Jumps Into the Ring with Microsoft, Yahoo!, Google 109 comments
mikkl666 writes "Even just since this morning, there's much to report in the ongoing fight between Microsoft and Yahoo!. After Yahoo! announced yesterday that they are testing Google AdSense, Microsoft reacted with a comment pointing out that 'any definitive agreement between Yahoo! and Google would consolidate over 90% of the search advertising market in Google's hands.' Ironically, they complain that 'this would make the market far less competitive.' Both companies try to team up with strong partners, as well. Yahoo! and AOL are now closing in on a deal to combine their Internet operations. And of course, this morning's news was that Rupert Murdoch's News Corp. is apparently in talks for a joint bid for Yahoo!"
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  • Bummer (Score:5, Funny)

    by garett_spencley (193892) on Wednesday April 09 2008, @01:35PM (#23015620) Journal
    So no Yahoo! logo dressed up as a borg then ? :(

  • What is MS hoping to gain exactly? (Score:4, Insightful)

    by jfbilodeau (931293) on Wednesday April 09 2008, @01:42PM (#23015700) Homepage
    Is it just me, or is there only chaos and mayhem in store if MS tries to merge with Yahoo? They are two incompatible business and I can't see what MS would gain from their multi-billion dollars 'investment'. Why does IBM & Lotus come to mind right now?

    • Re: (Score:3, Insightful)

      by Amouth (879122)
      i doubt i would consider it a "merge" of the compaines.. i doubht MS would ever really merge.. they would buy and then partion it out and let it rot..

      unless MS is don't noting but tasking a couple of spare MS people to throw out crazy offers at yahoo to cause PR and basicly make yahoo lose concentration as a company on what it is they should be doing..

      trust me when you work for a large company and there is a rummor of a buyout no one gets anything done really..

      i could see MS doing this.. why i don't know..

      • Re:What is MS hoping to gain exactly? (Score:5, Insightful)

        by zappepcs (820751) on Wednesday April 09 2008, @02:15PM (#23016050) Journal
        1 - embrace, extend
        2 - send threatening letter
        3 - lose shareholder support
        4 - throw chairs
        5 - remove legislator funding to pay off shareholders
        6 - merge companies
        7 - lay off good workers who have not yet left
        8 - pay millions to change logos, make announcements
        9 - pay off MSN staff
        10 ...
        11 profit!^H^H^H^H^H Watch Google grow exponentially
    • Is it just me, or is there only chaos and mayhem in store if MS tries to merge with Yahoo?

      Well that's what everyone around here is hoping. As for the other part of your post, this has nothing to do with technology. It has to do with market positioning and mind share. Microsoft wants to consolidate the online Yahoo! brand, which has a big following, with the MSN brand, which has had mixed results. This consolidation, in Microsoft's mind, will prime them for competition with Google.

      If Microsoft aquires yahoo, then you can be sure that all of yahoo's open source stuff will be buried unceremoniously. So from a technical standpoint, it probably is a nightmare for yahoo, but, again, this isn't about technology. It's all about marketing.
      • I would go one further and say it isn't about technology or marketing, but rather established mindshare. If it were solely about marketing it would be Microsoft trying to get Yahoo! in order to attract more people. What it's really about is Microsoft buying customers. They don't have to win anyone over if they buy the thing lock, stock, and barrell. What Microsoft isn't taking into account is the number of people who will jump ship when that happens. Many people will live on principle alone.
        • Many people will live on principle alone.

          That sure is some good crack you're smoking. I would have accepted some, but many? Many is the amount of people who won't even notice when MS buys out Yahoo.

      • Re: (Score:3, Interesting)

        by peragrin (659227)
        That's the point actually MSFT has a horrible track record when it comes to actually using purchases. MSFT will abuse Yahoo until it no longer exists, change it, mold it until it looks like Windows Live and Hotmail.

        The only thing Yahoo has that MSFT wants is customers for their online services. If MSFT wants customers it should try competing for them in an open market place instead of just trying to buy them.
    • I think that since Microsoft has failed so miserably to enter into the "Internet Market Place" with MSN, they would like to try again by buying an established, more successful entity.

      What Yahoo! and most people who actually like Yahoo! fear is that Microsoft will buy Yahoo! then screw it up the way it has done with so many other endeavors such as Hotmail.com. And let's face it, for those who pay attention to Microsoft's reputation for success in new markets, it's an almost certainty that Microsoft will fai

    • Re: (Score:3, Interesting)

      by ColdWetDog (752185) *
      What MS is hoping to gain has been extensively reported. Mostly it's an attempt to compete with Ballmer's Worst Nightmare - Google. What I find interesting is that a major stock holder who is presumably emotionally unattached from all the yapping and barking doesn't think it's such a good idea.

      (Legg Mason is a large Asset Management Firm [wikipedia.org]).

      Methinks the world in general would be better served if Mr. Ballmer upped his medication dose.

    • Re:What is MS hoping to gain exactly? (Score:4, Insightful)

      by UnknowingFool (672806) on Wednesday April 09 2008, @02:17PM (#23016074)
      Yes there will be chaos. Many people like myself can see major problems in the merger.

      The first being the technologies. Yahoo tries to be platform agnostic. They use whatever works best and is cheapest. Right now they support a lot of BSD projects. Microsoft mandates Windows. The conversion of hotmail years back was a major hassle for MS. That was just one system. Yahoo is much larger than that. That conversion will take lots of time and effort.

      The second issue is the cultures. I offer no opinion on which culture is "better", but they are different. Now MS is coming in as a hostile takeover. That is not going to sit well with Yahoo employees. On the other side, MS people may not want to bring in Yahoo people.

      Third, large scale mergers like this almost never work. AOL-Time Warner. Daimer-Chrylser. Recent history has shown that failure happens more often than naught. And those mergers were approved by both companies involved.

      • Re: (Score:3, Interesting)

        by Captain Nitpick (16515)

        Third, large scale mergers like this almost never work. AOL-Time Warner. Daimer-Chrylser. Recent history has shown that failure happens more often than naught. And those mergers were approved by both companies involved.

        Counterexample: ExxonMobil. Although the old Mobil employees still complain about the Exxon corporate culture.

    • There's good argument that MS is only after market share, primarily in email where the acquisition would give them a monopoly - less so in search and web properties where it would only slow their loss. And there's no argument that MS is after technology - as Yahoo's stuff is run on open source platforms MS could leave in place for awhile; but certainly not publicly develop further.

      However... consider this scenario:

      1. Microsoft makes a huge bid for Yahoo that, while not clearly being in it's own best interests, clearly *is* in the best interest of Yahoo shareholders, and is far too large to be matched by anyone.
      2. Yahoo predictably resists the offer, to the point where it's arguably *not* acting in the best interests of it's shareholders.
      3. Microsoft uses this behaviour to wage a proxy fight to get Yahoo's whole board of directors fired and replaced with people it favours.
      4. Microsoft now essentially controls the board of a competitor, without ever having actually bought them.

      Now... however you feel about an actual acquisition of Yahoo by Microsoft - can we all agree it would make perfect sense for Microsoft to wrest control of Yahoo's board of directors - even if they had no intention of buying them?

      Can anyone shed any light on whether it would be possible for Microsoft to win a proxy fight without an iron-clad guarantee they'd buy Yahoo under the terms of their current offer; or if Yahoo could do something that would force them to should the offer be a whole or partial bluff to win a proxy fight?

    • Microsoft isn't trying to merge with Yahoo, they are trying to take Yahoo over. A bit like Boeing did to McDonnell Douglas - buy them out and then shut them down. The value in buying Yahoo is to eliminate a competitor in the search arena, eat their marketshare, and go after their holy grail which is to next destroy Google.

  • I'm confused... (Score:2, Funny)

    by Anonymous Coward
    Does Yahoo have really aerodynamic chairs or something?
    • The real question is whether Yahoo has lavadynamic chairs. Ballmer is Satan after all, and I suspect most of Microsofts chairs have turned to ashes in the lava surrounding Ballmers Altar. And the helperdevils apprently havn't come up with a good solid chair that can stand the heat yet, and I think the reasoning is that, because of all the red in Yahoos brandname, Yahoos chairs may be more resilient to the lava. Thus it makes real good business sense to take over Yahoo, because, you know, then you get all

  • For god's sake, think of the games (Score:5, Funny)

    by peipas (809350) on Wednesday April 09 2008, @01:43PM (#23015704)
    I've said it before, if Microsoft eliminates Yahoo Cribbage I will kill myself.

    Do you want that blood on your hands, Microsoft?
    • Yahoo! is currently the king of fantasy sports games (hey, fantasy sports = fantasy rpg in coolness) and it would be atrocious to see those disappear. Beautiful interface, quality, accuracy. These aren't generally MS stregnths.
    • You clearly aren't familiar with the Great Netscape Mass Suicide Event. 100,000 dead in minutes. I hear Ballmer watches it every Christmas.

  • Microsoft gains nothing except reduced competition (Score:3, Insightful)

    by Bryansix (761547) on Wednesday April 09 2008, @01:48PM (#23015754) Homepage
    Microsoft will gain no synergy from this acquisition. If anything they are just gaining redundancies. This is just the extinguish part of their business.
    • Eh. Google gained nothing but redundancies by buying YouTube, but I'm not quite ready to call that a bad move.

      Microsoft does make some pretty boneheaded business decisions, but this one is too soon to call definitively.

      • Re: (Score:3, Insightful)

        by hkgroove (791170)
        I don't think so. Google consolidated redundancies if anything (even with keeping Google Video) and possibly created a better bargaining chip for the future of the video market when dealing with networks and the like.

        Whether or not it worked for the better is a different matter altogether.
    • Actually, they would gain flickr (I mentioned this in the flickr discussion [slashdot.org] as well... and probably better suited here...). Granted that's only a part of yahoo, it's probably a good stream of revenue for Yahoo and one of the few that people will actually pay to use; getting away from the advertising business model.

      There is also a lot of data (personal and otherwise) on flickr. flickr can almost be a myspace / facebook, but without the idiots as it has one purpose (photography) and not spread thin over
  • The more you tighten your grip, Tarkin....

  • Typical MS Arrogance (Score:5, Informative)

    by amplt1337 (707922) on Wednesday April 09 2008, @01:55PM (#23015838) Journal
    They're approaching a Yahoo! acquisition with all the grace of the Mongols taking over a medieval village -- "If you let us in, you'll get a rough deal; if you resist, you'll get an even rougher one."

    All it takes is for a couple more major shareholders to insist that Yahoo! is worth more than MS wants to pay, and the bluff will be very effectively called; you can't do a hostile takeover [wikipedia.org] if you can't find shareholders willing to sell a controlling interest, and the shareholders are ultimately the ones who would suffer from an overly low valuation. Sure, maybe the Board is holding out for an unduly high valuation, but more likely MS is mis-valuing Yahoo! -- though I'm sure Yahoo!'s value would drop to whatever MS paid for it pretty quickly, if Ballmer really wants to get this far out of the company's core business.

    All the more reason for major shareholders to turn their noses to the deal.
    • "You've got two choices. We can do this the hard way, or we can do this the REAL hard way."
    • But all Microsoft has to do is find a senior manager or two who have significant stock and are disgruntled. Bound to be plenty of those. Microsoft then makes them a job offer with much better pay. Cheaper than buying the stocks directly. Not sure if they can buy stocks directly, but if they can, again, that would be cheaper than buying all the stock. A third option is for Microsoft to act in ways that deliberately drive Yahoo's stock value down and use the threat of financial loss to intimidate shareholders
  • If you're like me, you don't want MS to get ahold of your ancient Yahoo mail account.  Not that I trust Yahoo implicitly, but I don't trust MS at all.

    So I plan on springing for the $20 for POP access to the account, so that I can retrieve/delete the decade's worth of email I have in there.

  • Go for it Bill! (Score:5, Insightful)

    by pegr (46683) * on Wednesday April 09 2008, @01:59PM (#23015876) Homepage Journal
    While I would hate to see Yahoo! bite the dust (more for historical reasons), it would be great for MS to flush a stack of cash, as I can see MS doing nothing but destroying what little is left of them.

    Yes, MS, cash out everyone still hanging on to that sinking tub! The faster MS runs out of cash, the sooner we get to enjoy a world without them.

    As for Yahoo!, I remember when you all didn't suck. Yep, you and HP...

    • The faster MS runs out of cash, the sooner we get to enjoy a world without them.

      You haven't seen the SCO trial, have you? An organization can go for YEARS without any money as long as the a-holes running it have enough personal wealth to pilot their sinking ship.

  • What is Yahoo Worth? (Score:5, Interesting)

    by RobBebop (947356) on Wednesday April 09 2008, @01:59PM (#23015880) Homepage Journal

    Yahoo! [yahoo.com] is currently maintaining a $36 Billion dollar market cap. It goes without saying that deciding what an internet company is worth is somewhat shaky ground, but they are profitable by $0.47 per share in the last year and they have a set of managers who are clamoring that they have a lot of new revenue streams that are going to materialize in the next year or two.

    So, what is Yahoo! actually worth if Microsoft's offer isn't good enough? $40 Billion? $50 Billion? $60 Billion? $100 Billion?

    Can anybody defend their valuation with some finite analysis that goes beyond pulling numbers out of thin air? Furthermore, can somebody figure out how much Microsoft would be willing to pay based on the benefits that merging Yahoo's customers and properties into their own would produce?

    If you look at the 5-year chart for MSFT [yahoo.com], it is pretty clear that they have done a good job of maintaining the status quo... while the only real marketable success that they have enjoyed during that time has been the introduction of a competitive video game system.

    On the other hand, the 6 month chart for Google [yahoo.com] is suggestive that the future value of internet based ad revenue isn't worth nearly as much as it used to be.

    So, what gives?

    • while the only real marketable success that they have enjoyed during that time has been the introduction of a competitive video game system.
      depends on how you define competitive. IIRC, they're selling the console at a good bit below cost. then again, i'm fairly sure sony is selling the ps3 below cost also, though i believe nintendo is making a profit on each wii system.
    • I don't think you can draw the conclusion that internet based ad revenue is less valuable by looking at the charts. Google's problem is their burgeoning expenses and the fact that it is hard for any company to grow 30% in perpetuity.

      Online advertising is set to grow 23% this year [google.com]. Better still, it is expected to double in just four years to about $40 billion. Better than a sharp stick in the eye.

      MSFT has held serve because of their massive cash flow from sales of Windows. However, that cash cow is diminishi

      • Re: (Score:3, Interesting)

        by RobBebop (947356)

        Better still, it is expected to double in just four years to about $40 billion. Better than a sharp stick in the eye.

        So they think they can capture 50% of the $40 Billion revenue per year in 2012 (assuming they can split it with the other major competitor), instead of 20% (if they are fighting against both Google and an independent Yahoo!).

        I like it. Your reason gets a gold star. Yahoo! will help MSFT capture revenues of $20 Billion per year of internet advertising revenues instead of $8 Billion per year in only a matter of several years. Subtract out the costs, and owning Yahoo! might generate an extra $30 Billion

      • First I must say I don't understand anything about shares

        You missed the point of each chart that I linked to (assuming you even went and looked at them or even tried to infer what they looked like based on the context of the description that I added.

        The first chart was showing that Microsoft has not had any significant "growth" since prior to 2003, which suggests that they think acquiring a company like Yahoo would change that.

        The second chart was to approximate the short term value of the internet advertising market, which is apparently the reason the MSFT

  • From the fine article:

    A major Yahoo Inc shareholder, Legg Mason, is ready to back Yahoo's effort to stay independent if Microsoft Corp lowers its buyout offer, the Wall Street Journal said, citing an interview with portfolio manager Bill Miller.

    Seems to me that adds up to vote count of 1 against, and an undetermined number in favour of the buyout.

    I have no idea who Legg Mason is, or what influence he has, but it is possible he's a Carl Icahn type and his actions may be an important factor. That said, my gu

    • Re:It's a start (Score:5, Informative)

      by RobBebop (947356) on Wednesday April 09 2008, @02:08PM (#23015970) Homepage Journal

      I have no idea who Legg Mason is, or what influence he has

      Legg Mason is an investment firm that owns a 6% stake [yahoo.com] of Yahoo.

      This is actually 83,843,501 votes AGAINST the current MSFT offer.

      • "This is actually 83,843,501 votes AGAINST the current MSFT offer."

        Uhm, no. it's 1 vote. 1 vote which happens to have a 6% share of the total, or 83,843,501 shares. That doesn't make it 83,843,501 votes.

        As much fun as movies make it to say that somebody has 1 million reasons (dollars) to kill somebody, you shouldn't apply that to general life. If nothing else, the U.S. electoral college should have taught you that.

  • Integration = death march for MSFT (Score:3, Interesting)

    by Fastball (91927) on Wednesday April 09 2008, @02:02PM (#23015902) Journal
    Two very divergent cultures. I think it is a lose-lose for MSFT. Get the deal done, and they become mired in a prolonged integration while adding significant debt to their balance sheet. The deal falls through and they are still left with an eroding cash flow (Windows) and problems with execution in virtually everything else they are in.

    It is fascinating. You have two dinosaurs from two different periods. The Windows OS boom during the late 80s to mid 90s for MSFT and the internet boom during the mid 90s to early 00s.

    I'm not expecting the best of times for either company, but unlike most folks, I'd bet on Yahoo for an appreciation 5-10 years out from now. MSFT is almost like a energy MLP. Everyone gets paid...until the resource runs out.
  • If I despise both companies should I be for or against a merger?
  • If the shareholders are behind the board on this one then perhaps now would be a good time to enact a poison pill [wikipedia.org] to make any hostile takeover a very bitter pill indeed for Microsoft to swallow.
  • It's really not a resounding no to the merger, the basicly said we won't support any sort of deal if MSFT lowers the offer. They also said if you pay an extra $1 a share we'll support your takeover 100%.
  • They've realized their future in the Operating System market is pale at best.
    Remember the EU court's decision about Microsoft being a monopoly? Well this was on Sep 2007. Is it a coincidence that less than 5 months later Microsoft offered to buy Yahoo!? I think not.

    Sooner or later Microsoft would have to lift the veil [boston.com] on the APIs for their most popular products, and *anyone* (including GPL software developers) can read them. Microsoft knew this day would come, and their desktop market dominance will be dest

  • Could spell trouble... (Score:3, Insightful)

    by imstanny (722685) on Wednesday April 09 2008, @02:37PM (#23016270)
    The same thing happened to Cablivision, when the Dolan family wanted to buy them out for $36/share. Some major shareholders like ClearBridge Advisors, who owned 31.4 million shares at the time, or 13.6 percent of Cablevision voted against the buyout. When the buyout didn't go through, price fell to $30, and is now ~$23/share.

    Remember, Yahoo was trading at ~$19/share, before Microsoft's offer inflated the price to ~$31. Microsoft, essentially, bid up the price. If the merger is voted against, the price will likely fall back toward $19 (I say this because aside from Microsoft's offer, nothing materially changed with Yahoo. In fact, they are projected to miss their quarter numbers which they will be reporting in a couple of weeks).

    Also, Microsoft can start buying up Yahoo shares on the open market in a hostile bid (from Shareholders willing to sell their shares), which are currently trading below $31/share. So I wouldn't be surprised if Microsoft will get Yahoo below their current offer...
  • Not to be mean to microsoft or anything. But its reaaaly difficult for me to understand how in the world someone at microsoft can think that they can take over yahoo and on top of it they will retain the good talent in yahoo.

  • Former Yahooligans? (Score:4, Interesting)

    by zentinal (602572) on Wednesday April 09 2008, @02:49PM (#23016402) Homepage

    I would assume that since the takeover has been announced, that Yahoo! has been bleeding talented folks who don't want to be assimilated.

    Have any of these folks started new companies? Any high profile defections to the Googleplex? Or would that be prevented by non-compete clauses in their contracts?

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