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Yahoo! Rejects Microsoft's Offer, Says 'Still An Option'
Posted by
Zonk
on Mon Apr 07, 2008 08:33 PM
from the oh-just-get-a-room-already dept.
from the oh-just-get-a-room-already dept.
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!'"
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[+]
Shareholder Backs Yahoo!, Supports Independence 149 comments
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."
[+]
News: Carl Icahn Takes on Yahoo's Board 279 comments
narramissic and several others have written to point out that Carl Icahn has initiated a proxy battle with Yahoo's board of directors over their rejection of Microsoft's bid for the company in February. Icahn has purchased millions of Yahoo shares over the past week and assembled a group of nine other investors (including Mark Cuban) to persuade the board to resume talks with Microsoft. Yahoo remains unimpressed. Icahn's letter to Yahoo accuses:
"It is unconscionable that you have not allowed your shareholders to choose to accept an offer that represented a 72% premium over Yahoo's closing price of $19.18 on the day before the initial Microsoft offer. I and many of your shareholders strongly believe that a combination between Yahoo and Microsoft would form a dynamic company and more importantly would be a force strong enough to compete with Google on the Internet."
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crack smoker (Score:5, Interesting)
oh and he must be pretty dense to think "friendly negotiations" are still an option if MS goes to the shareholders directly.
Re:crack smoker (Score:4, Funny)
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Re:crack smoker (Score:5, Insightful)
I think that it's just another nice way of refusing.
I think that the Yahoo! folks realize that Yahoo! and Microsoft don't really mix together.
Microsoft only wants the userbase and the brand, not the products. If Microsoft were to acquire Yahoo!, all their technology (Apache, Oracle, MySQL, PHP, Java, etc running on top of Linux and BSD) would be replaced by Windows servers running IIS. That would make most of the Yahoo! engineers redundant.
I am pretty sure that they would just add the missing features to their Live products, and rebrand them as Yahoo! The Yahoo! products will start a short (i.e.: 1-2 years) death as soon as Microsoft buys them, to make room for Yahoo! branded MSN/Live ones.
Imagine a .NET/Mono based Zimbra.
Furthermore, I assume that at that level all negociations are 'friendly'. Unless they fail, when they become friendly only for the winning side.
Finally, I do believe that Yahoo! is worth more than that ammount, because there are countries where no competition exists (see Romania). In a blog from one of the Fedora Art Group members, the blogger said that over 90% of the email addresses in Romania were Yahoo! ones. I can confirm this with the Messenger part. I've never seen anyone giveout a GTalk or MSN id in Romania, only Yahoo!.
Parent
My yahee, my yahoo (Score:5, Funny)
Parent
Re:crack smoker (Score:5, Interesting)
Microsoft only wants the userbase and the brand, not the products. If Microsoft were to acquire Yahoo!, all their technology (Apache, Oracle, MySQL, PHP, Java, etc running on top of Linux and BSD) would be replaced by Windows servers running IIS. That would make most of the Yahoo! engineers redundant.
Ok, so devil's advocate / tinfoil hat time.
I'm not exactly going to predict this because, come on, Microsoft, but I could sort of see them leaving Yahoo! alone technologically, at least in the short term.
Let's assume there's some viable evil reason for Microsoft to want expertise with PHP/MySQL/etc. in their stable. Microsoft basically cannot grow something like that organically from within. You can't create Microsoft MySQL without essentially admitting there's something wrong with SQL Server, etc.
But you could plausibly buy Yahoo, point to the past migration nightmares of Hotmail, and say that you were wisely letting Yahoo continue with their current technologies due to those experiences.
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Re:crack smoker (Score:5, Insightful)
They'll leave them alone until it makes sense to move over to windows/IIS. Hotmail stayed on BSD for years, but it's been IIS for quite a while now. they're not stupid, they'll treat it as business and move them over when it makes sense to do so. But the Golden rule in most markets is you sure as hell better eat your own dogfood if you expect your customers to, and eventually they'll have to move Yahoo! over if they do buy them.
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Hotmail wasn't migrated sooner because... (Score:4, Informative)
They'll leave them alone until it makes sense to move over to windows/IIS. Hotmail stayed on BSD for years, but it's been IIS for quite a while now. they're not stupid, they'll treat it as business and move them over when it makes sense to do so. But the Golden rule in most markets is you sure as hell better eat your own dogfood if you expect your customers to, and eventually they'll have to move Yahoo! over if they do buy them.
Hotmail was launched on the 4th of July of 1996 and was bought by Microsoft in December of 1997. Microsoft believes strongly in the concept of "eating one's own dog food" (please note: this is a common term for using one's own products internally), and so immediately started making announcements that Hotmail would be migrated to Windows NT. The NT migration utterly failed, and there were even problems with the Windows 2000 migration. In June of 2001, Microsoft announced it had migrated the BSD portion of Hotmail to Windows 2000, but was forced to retract that statement a few days later. The final migration of all of Hotmail to Windows wasn't completed until 2003.
Not only because of Microsoft's belief in the "eat your own dog food" principle, but also because Microsoft had made public statements saying it was going to migrate hotmail to Microsoft operating system and web server software, it is clear that Microsoft really wanted that migration to work, but it still took over five years and three versions of Microsoft's server software.
Parent
Re: (Score:3, Interesting)
Not only because of Microsoft's belief in the "eat your own dog food" principle, but also because Microsoft had made public statements saying it was going to migrate hotmail to Microsoft operating system and web server software, it is clear that Microsoft really wanted that migration to work, but it still took over five years and three versions of Microsoft's server software.
You know, for the first time you've made me wonder if Microsoft actually did make the long-term smart move by migrating Hotmail.
I mean
Re:Hotmail wasn't migrated sooner because... (Score:5, Insightful)
While the parent post doesn't quite reach the level of astroturfing, it does feel like an attempt to find a silver lining in what really was an unmitigated fiasco for Microsoft. The company announced quite loudly that it would be migrating to NT, then failed repeatedly. It then more quietly began migrating to Windows 2000, then announced success, then had to retract that. It then issued a white paper on the migration, arguing that Windows 2000 was a better platform than UNIX, even though there were still Solaris and even BSD servers being used until 2003, well after the white paper was issued, and in many cases, BSD code was used to replace the parts of the Windows server OS that just weren't up to hosting a major application like Hotmail.
Please note that I am not saying there is anything wrong with Microsoft using BSD code - the BSD license clearly permits that. The point is that for whatever reason, despite immense financial resources and huge financial and PR incentives, Micrsoft appears to have been completely incapable of making an industrial-strength OS as late as 2002 that could match the power and security BSD and Solaris had in 1997, and when it did have success, it was by simply appropriating the superior code from the BSD base.
Additionally, and actually this is my main point in writing this post, whether or not Microsoft had bought and tried to migrate Hotmail, the evolutionary pressure to improve its OS's security and scalability would have been just as strong. So I really don't see the silver lining in this story the way the parent post does. If there is a silver lining for Microsoft, it's that they learned that BSD code is often just plain better than Microsoft code, and simply taking the BSD code is more effective and a lot cheaper than trying to catch up. One wonders why they don't take something like OpenBSD and make a Microsoft front end for it. Windows would then basically be a window manager, a lot cheaper and simpler to maintain, and the heavy lifting would be done by a system that has time and time again been shown to be better than any Windows ever built, especially in terms of security, which is really the biggest issue with Windows these days, what with there being multiple botnets of hundreds of thousands of Windows machines out there eating massive amounts of internet, LAN and machine resources.
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Re: (Score:3, Insightful)
Finally, I do believe that Yahoo! is worth more than that ammount, because there are countries where no competition exists (see Romania). In a blog from one of the Fedora Art Group members, the blogger said that over 90% of the email addresses in Romania were Yahoo! ones. I can confirm this with the Messenger part. I've never seen anyone giveout a GTalk or MSN id in Romania, only Yahoo!.
Microsoft's original $31 per share offer represented a 62% premium to where Yahoo's shares had been trading before the offer. The market determines price, and they were valuing Yahoo at $19/share. Also, look at the current trading price = MSFT's offer is $31, yet YHOO is trading at under $28. By your logic it should be trading above $31, but it isn't because Market thinks it's worth less than what Microsoft is offering them, and if they keep rejecting Microsoft, then their stock will go down - regardless o
Re: (Score:3, Interesting)
Imagine a .NET/Mono based Zimbra.
I think you may have hit the nail on the head there.
Microsoft can't afford to lose their monopoly on the desktop because they don't have anything else viable as a business plan capable of generating that kind of revenue. Right now, about the only thing underpinning that monopoly that they have significant control over is Office - and specifically, the combination of Outlook and Exchange.
Now, hold that thought for a minute.
OSS can't be destroyed by Microsoft. But the major sources of funding can be - at l
Re: (Score:2)
Re: (Score:3, Interesting)
For a start, it's nowhere near 2x, since the value of MS shares, and hence the offer have dropped since the initial approach.
Microsoft have some interesting times ahead too, and Yahoo shareholders might be considering the risk of turning their Y. shares into MS ones.
Microsoft's stock buybacks, for example, are being used to counteract stock options paid to executive employees. Th
Re:crack smoker (Score:4, Interesting)
That's an interesting soundbyte. Can you explain how stock options paid to executives (which executives?) are actually eating into a $30 billion dollar cash reserve? Those must be some pretty large stock grants.
Looks like someone is connecting all those Vista machines that are not being sold to the internet. [hitslink.com] I'd like to have me a few of those failures every decade or so.
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Re:crack smoker (Score:4, Interesting)
Remember the words of Michael Dell wrt Apple? Apple isn't buying back its stock, it's buying new campuses, data centers, retail outlets, investing in building products to serve new markets, all of which are selling off the charts.
Microsoft is failing in every consumer electronics arena it enters. It's brightest star is the xbox, which has only made a few million in the last quarter after billions of losses. Sales have now plateaued, forcing the company back to release a new xbox generation and start spending again.
Video Game Consoles 2007: Wii, PS3 and the Death of Microsoftâ(TM)s Xbox 360 [roughlydrafted.com]
Vista might be shipping on some new PCs, but remember that nobody ever questioned Windows' ability to sell. It's a monopoly! Everyone expected MS to sell Vista without any hiccups. It was the consumer business and Windows Media/PlaysForSure, Zune, WinCE/Windows Mobile, Windows Embedded that were all on fire and sustaining deep losses. Microsoft can't sustain mild sales on Vista after spending billions to develop it over the last 6 years and having nothing really to show for all that.
Windows 7 won't show up for another three years, so Vista has to generate cash across that whole time period, not just ship on some new PCs. What's happening though, is that cheap PCs like the EEE and OLPC are running Linux, premium PC sales are getting eaten into by sales of Macs that are outpacing PC sales by 4x, and major vendors are begging to ship XP.
Microsoft's flat stock has been placid for a decade during record earnings boosted by automatic OEM PC sales in a period where the PC-box was the only game in town and there was no effective competition. MS is now being hit by competition at the low end and the high end, while also finding the PC market itself coasting along statically. Sales volumes are shifting toward mobile devices.
MS hasn't successfully delivered mobile devices anyone wants. UMPC was a huge failure, Windows Mobile is a joke. Now its facing the iPhone/iPod Touch and an array of smartphones from other vendors, without any viable game plan.
At some point, you can't say MS will survive on its good looks and personality alone, because its business is facing several points of failures. Yahoo knows that. It also knows that a MS takeover would gut the company and destroy shareholder value.
Why Does Microsoft Really Want Yahoo? [roughlydrafted.com]
Parent
Re: (Score:3, Insightful)
Why is it bad for a company to return cash to investors? 'You invested in us, and now you get some of the profit' sounds like thouroughly sensible economics. I'd expect it if I invested in a company directly.
Re: (Score:3, Informative)
It's a pretty big topic to summarise in a Slashdot posting, and you'd be a LOT better off doing your own research, if you're genuinely interested. But...
Basically, stock options are a company's way of convincing employees to take less real wages. Paying in stocks has some advantages, but one in particular is that they don't show
Re:crack smoker (Score:4, Funny)
a CEO that does not jump [youtube.com] on stage and throw [theregister.co.uk] chairs
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Re: (Score:3, Insightful)
I still use Google for search (and I don't use Y!UI), but I respe
Pay for Yahoo's true worth? (Score:5, Funny)
Premium Price (Score:3, Interesting)
Re: (Score:3, Insightful)
what else would you call it when after ten years of competition, their brightest idea is to try to buy out the competition, not with money earned by fighting the competition, but by using their main cash cow as their own means to compete?
I'd call that business as usual in this industry.
Example: YouTube wasn't bought with money Google made off of Google Video. Microsoft, Google, and Yahoo all do this all the time.
This is like... (Score:5, Funny)
Re:This is like... (Score:4, Funny)
Yahooooooo!!!!
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The real question is why? (Score:4, Interesting)
The most likely result of such a purchase would be that they'd try to turn Yahoo! into another Microsoft division and destroy what they were after in the first place.
Seems a strange purchase to be chasing after so hard...
Re: (Score:3, Interesting)
If that transaction ever takes place, I'll immediately wipe my Microshoo! mail account.
Re: (Score:3, Insightful)
Yahoo owns Zimbra, the FOSS threat to Exchange. This is a cheap way for Microsoft to destroy a wide swath of open source products and projects Yahoo contributes toward.
The market has given Yahoo a low valuation based on its earnings and future outlook both as a company and in the current recession. It's the perfect time for Microsoft to exploit that to expand its monopoly power and kill off competition.
Re:The real question is why? (Score:5, Insightful)
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Re:The real question is why? (Score:4, Insightful)
Microsoft always needed an enemy to rail against (because they usually didn't innovate, rather copied and improved upon). They have been at this unfocused lash-out stage for quite a number of years.
But really, this purchase is redundant. They're better off taking the excess cash, paying dividends, and let that be the end of it. The MS/Yahoo merger will be stillborn. The management there will be hostile and leave after the buyouts and the Microsoft drones won't be any better.
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Re: (Score:3, Funny)
Say what you want about Bill, the company did nothing but grow under him (granted there was the
Re:The real question is why? (Score:5, Informative)
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Re: (Score:3, Insightful)
What does Yahoo! have that Microsoft prizes so highly?
Well see, the boxers I'm wearing right now are worth $2. But if you offered me to buy them for $3.24 (a 62% premium), there's no way in hell I would accept. Surely that's way more than they are worth though, but I still wouldn't accept. However, I would accept if you made an offer I would deem good enough, something way above my boxers' real value, somewhere around $50.
So what's so worthy about my boxers so that I wouldn't let them go for less than 20
Re:The real question is why? (Score:5, Funny)
Hey look, I have no problem with women on Slashdot, but if you're going to hang out here you're going to have to learn to deal with the things that make you different from men.
Parent
Re:The real question is why? (Score:5, Interesting)
I can't imagine that would continue if Microsoft bought them out. And most of the in-house developers would have to learn asp real quick, or be out of jobs.
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Yahoo has enhanced value (Score:2)
This highlights the decline of both companies (Score:4, Insightful)
Why would Yahoo refuse to accept an offer that is clearly more than they'd get from anyone else? Maybe management has its head in the sand as to its marketplace position.
Going hostile on the acquisition is really, really stupid since one of the best parts of an IT company is the IT talent.
Going hostile will antagonize the whole company, including the best IT talent, IMO.
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I figured it out (Score:2)
Re:I figured it out (Score:5, Insightful)
Bingo!
The only motive here is the elimination of a competitor. Price is no matter; Microsoft wants Yahoo! destroyed because it's one of the two barriers in the way of Microsoft owning the search business.
It's similar to back when Microsoft decided that Netscape had to die. It rapidly became clear that the leaks were true: Bill and Steve had decided that they would lose whatever money they had to lose to own the browser market. They succeeded, and although they've made no money from IE at all (i.e., they've sunk the entire cost of developing it), they are now firmly in control of what the majority of eyes see on the Web. Sinking a few hundred million into IE was a small price to pay for that power.
Their goal now is to control what all those eyes see when they search the Web. Their problem is that most people think either "google" or "yahoo" is what you type to do a search. Not even MS fanboys like MS's search. They understand that they can't compete in the search arena on quality. So they're going to use their huge pile of money to destroy their remaining competitors. Yahoo is the easiest target, so they're going after it first. And they'll lose whatever they have to lose to kill it.
Then it'll be google's turn in the crosshairs.
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Re: (Score:3, Insightful)
What's Microsoft gonna do with no cash? (Score:4, Interesting)
So for this reason. I hope Yahoo accepts the deal.
Yahooligans, more like it. (Score:4, Insightful)
If I was a shareholder, I would be very mad. If Microsoft is going to do a hostile take over by buying their shares on the open market, they'll probably get Yahoo for less than their current offer. Same thing happened with Cablevision a few months ago. When the Dolan family offered a buy-out for $36, some 'major' shareholders rejected the offer, pompously saying that Cablevision is worth more. Well guess what, the market didn't think so. The second the buyout was rejected, the stock plummeted below $30 and is now at $23!
Re: (Score:3, Informative)
Yahoo believes that there company is worth more than market value, even more than market value +62%. They are choosing to to sell it as such, and will even try to convince the shareholders not to sell.
Company's Value != what other are willing to pay for it, if you don't want to sell it.
Re: (Score:3, Insightful)
So if I offer you $10 for your car and no one makes anymore offers, then your car is somehow worth $10???? This is idiotic. Yahoo believes that there company is worth more than market value, even more than market value +62%. They are choosing to to sell it as such, and will even try to convince the shareholders not to sell. Company's Value != what other are willing to pay for it, if you don't want to sell it.
You're not understanding how the market works. Yes, if you don't want to sell the car for $10 then it is because YOU think it's worth more than $10. However, there's more than 2 parties in this transaction. Yahoo doesn't control all shares of the company. Shareholders, the other owners, also control shares of Yahoo. If the Shareholders want to sell their shares for $31, or less, they will do so - and if Microsoft accumulates Enough shares of Yahoo, they will end up owning Yahoo whether or not Jerry Yang th
Just a part of Microsoft's Open Source Strategy (Score:4, Insightful)
Embrace/Extend/Extinguish
Yahoo is way overpriced (Score:5, Insightful)
Yahoo's stock is way overpriced. They're a large, mature company, not a growth company. Revenue is down. So they should have a P/E ration in the 10-20 range, like IBM, Microsoft, Oracle, and SAP.
But YHOO has a P/E ratio of 59 today. Which is far, far too high. Their market cap is around $37 billion. Divide that by 4 and you're close to what the company is really worth. Maybe $10 billion.
This is why Microsoft's institutional shareholders are unhappy with the proposed deal. Microsoft is overpaying, and that makes Microsoft less valuable.
Of course, if Microsoft just drops the deal, the bottom falls out of Yahoo stock, and it probably goes down to something closer to what it is really worth.
Google is overpriced too, but not as badly. Their P/E is around $36, while their revenue is flat or declining slightly. The fundamental problem with Google is that all those free services they give away don't make them any money. They've never found a second big moneymaking product.
Re: (Score:3, Interesting)
They're a large, mature company, not a growth company.
Not sure why you think this. The internet is a revolutionary zone, where something completely new could come out at any moment. Furthermore, non-revolutionary revenue, such as advertising and online sales, are growing at a rapid rate. It is reasonable to assume that Yahoo will continue to make money off both of these areas. Even if advertising/Yahoo marketplace revenue doesn't increase significantly, Yahoo could still increase their value significantly with a reorganization and streamlining of their op
Re:Yahoo is way overpriced (Score:5, Informative)
If we believe Yahoo's forecasts, their stock price has a fair value closer to $40/share, but even coming up short of this doesn't make them very overpriced. They are in a rapidly growing industry and have had double digit revenue growth for many years, so I think they still qualify as a growth company.
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Yahoo trying to force the issue? (Score:3, Interesting)
Re: (Score:3, Insightful)
I'm simply amazed at how many people think this won't happen. This merger is going to happen, regardless of what the current Yahoo board may say. If they don't approve it, they will be replaced by the angry shareholders, who are being robbed of the best offer they'll ever see for their shares.