Microsoft Offered $40 a Share For Yahoo

fistfullast33l writes "Bloomberg is reporting that a recently unsealed court case by shareholders against Yahoo reveals that Microsoft offered $40 a share for the Internet search company in January 2007 and Yahoo turned it down. We've extensively discussed Microsoft's bid for Yahoo earlier this year for $33 a share, which was rebuffed. Investor Carl Icahn has launched a proxy fight against Yahoo over the spurning of the Microsoft deal." CWmike notes Computerworld's coverage of the revelations: "The complaint places much of the blame on [Yahoo CEO Jerry] Yang, describing him as someone with a 'well-known' antipathy toward Microsoft who acted out of a personal interest to keep Yahoo independent. Something wrong with that? Oh, yeah... public company."

Jerry Yang did the right thing

Sure it cost his shareholders billions, sure he's going to lose his job and be sued into oblivion for gross mismanagement, sure he will be lucky to make it out of the shareholder's meeting without being tarred and feathered. But the important thing is that he stood up to Bill Gates, stuck out his tongue, and yelled "I DON'T LIKE YOU!"

And isn't that what it's all about, folks?

No

It's about taking your January share price of $19 and doubling it into $40 over the course of a few short months, not to mention your shareholders, and perhaps most importantly vested employees. Sure, Jerry has a lot of cash with or without Microsoft but employees with shares could literally double their investments overnight with this deal. I'm sure theres a good bit of internal angst.

People used to speak of Microsoft Millionaires, this could have made a few Yahoo Millionaires. Chances are Ichann will get a shot to do what Jerry should have done.

Re:No

Follow the news, it's not that hard.

It's not just Ichann. It's several managers of several mutual/hedge funds, several of which tend to be quiet and not meddle in the affairs of boards and the like. They just want a steady ROI. But this was just too much. You might just find a significant enough coalition of major shareholders to oust the board.

And read my other post. Yahoo's stock price climaxed at $41 post-bubble, and has been sliding steadily downhill ever since. He can talk all day, but Yang hasn't shown he can turn the ship around until he's forced to. And at that, since Microsoft's offer is withdrawn, the price is still creeping downward. All talk, no game.

He did something far worse than that...

.... He made a long-term decision instead of thinking about short-term profits. He's being sued for looking beyond the next few quarters.

If you think Yahoo can't turn it around, then yeah. He fucked up big-time. But if you think (as I'm sure he does) that Yahoo can be an innovative company that can step in to fill the gap as Microsoft declines, then he did the right thing. Hardly matters either way though. (Some profit now > Lots of profit over time) in the eyes of wall street.

Re:He did something far worse than that...

Look at their 10 year trend here [google.com].

They peaked at $100 a share before the bubble popped. Fair enough. Steadily rose to $41 back in 2005. Nice. But now look at the trend - steady decline ever since. Clip off 2008 to remove Microsoft's influence and the trend is even more severe. Yahoo's stock price is dying. Jerry can flap his wings and talk till he passes out about raising the value of Yahoo, but he wasn't doing it for the three years up till now, why is it magically going to occcur now? Microsoft was their best shot at creating shareholder value.

Re:He did something far worse than that...

Clearly google is a biased source.

Right thing for employees.

Yahoo would not have survived to 2009 if all it's employees quit. That's why Yang made sure $2 billion of the purchase price would go to employee severance plans. There's probably been some disruption anyway. Wouldn't you have a resume on the street with all of the FUD and BS being flung? The severance plans gave employees a reason to stick around and be fired by M$, or just keep on working if the deal fell through.

Painting this to be a personal thing by Yang is nuts. Yahoo and M$ were getting along famously until M$ decided to launch a hostile takeover.

Jerry Yang did the right thing for the COMPANY

Yeah. That will have been worth it, when in 2010, Yahoo! shareholders realise their $11.00 per share.

It all depends on your perspective. Yes, it WILL be worth it for Yahoo EMPLOYEES and USERS. On the other hand, Yahoo SHAREHOLDERS are understandably unhappy. Yahoo shareholders that are angry are upset because they wanted a way to jump ship and make a boatload of money...pure greed. A buyout would hurt Yahoo employss, Yahoo users and the industry as a whole. It would make the AOL/TW and Daimler/Chrysler mergers look like a raging success.

If it came as a surprise to anyone that Yahoo's founders and high-level managers have an antipathy towards MSFT then they must've been living in a cave, or are total morons. From Yahoo's inception there has been little love for MSFT--if they ever cooperated it was grudgingly, in their own self interest. There is a cultural gap bigger than the Grand Canyon there.

It doesn't help that there is a giant impedance mismatch when it comes to technology and infrastructure. A Netcraft search is telling: Yahoo is almost universally FreeBSD, and what is left is Linux. Yahoo has ZERO Microsoft in their data centres. MSFT, of course, is almost universally Windows Server.

Remember what happened to Hotmail when MSFT bought it? They ripped out all the FreeBSD over the first couple of years, subjecting users to regular periodic disruptions. "To hell with users, we eat our own dogfood dammit!". Not only that, I'd say most of the hotmail employees were abandoned too--wandered away or pushed out.

Hotmail still exists today as a cornerstone to MSFT's "Live" initiative and is probably the biggest webmail provider out there so it wasn't all bad of course, but there is a difference here: MSFT had no webmail service of note before buying Hotmail. In the case of Yahoo, what have they got that MSFT doesn't have? They both have an IM platform and client, a search portal, webmail, advertising services, etc...except NONE of Yahoo's runs on MSFT technology! Within 2 years, the yahoo portal will be gone, the IM client will be gone, the webmail will be gone, everything will be gone. Yahoo is coveted for its customer base and advertising presence. It'll live for awhile as "MS Yahoo! Live" for awhile then it'll be gone. It's employees will be gone. It'll be a footnote in history.

It doesn't matter all that much to me; I have no great love for either company and think they both offer mediocre service and crappy software. However, if Yahoo's directors and Yang himself care about the company and really believe it would grow, they've made the right decision to resist a buyout by MSFT. You'd have to be a fool to think there'd be anything of substance left of Yahoo after MSFT slayed them and feasted upon the corpse. Some of us would cheer to see that, but I'm betting the founder, directors and loyal employees would understandably NOT want to see that.

Anyways, who is to say that Yahoo shareholders would be better off with the MSFT shares tossed their way in a buyout? Right now, I'd say NEITHER stock is going anywhere exiting in the next 2 years. By the way, if you just go by the charts, Yahoo did the right thing; in the past year, YHOO has lost just over 9 percent, but MSFT has lost over 10 percent. If you extend where things have been out to 2010, if you think YHOO is heading towards $11, then MSFT will probably be $10.50.

Public companies

Fair warning: Rant

Public companies are now being run by the shareholders that take out payday loans, refinance their houses so much they owe money when they sell, cannot build traditional savings since all their income is treated as disposable. Basically the get rich generation with no long term goals other than their next big "fix".

Why does it surprise anybody that the driving force behind these companies is to sell out no matter what the cost to the business, the employees, or even the customers?

Re:Public companies

Why does it surprise anybody that the driving force behind these companies is to sell out no matter what the cost to the business, the employees, or even the customers?

And to head off the stream of ignorance about to insist that public companies are legally required to maximize shareholder value, the US Supreme Court has rejected that interpertation. The purpose of a Board of Directors is to protect a company, which it is allowed to view as a collection of relationships between customers, employees, etc. The case that decided this precident was based around rejecting a higher offer to take one that better served the companies culture.

Your company culture may be "profit maximizing," but don't pretend you can dictate to other companies.

Re:Public companies

Teh surpreme court ruling does not matter.

The shareholders legally run the company and as such can do whatever they hell they like including firing CEO's who do not sell out for get rich quick schemes.

You can try to protect the company and what you feel is the best but the shareholders can legally fire you for doing so if they disagree with yoru directions. Actually they fire the board and create a new one who replaces you but still.

I wish these financial institutions would return to long term growth.

Re:Public companies

Actually, what you're referring to is the "business judgment rule,"... The Board is *required* to focus on maximizing wealth for the company's owners, i.e., the shareholders.

No, I'm not. And no, the board is not. Unocal v. Mesa Petroleum established that, for Deleware companies (like Yahoo!), when faced with an unsolicited bid, the board could take into account not only shareholder value, but also the interests of: creditors, customers, employees, and possibly a larger community.

When the Board throws a "For Sale" sign up, however, it is obligated to take the highest bid.

Re:Public companies

The small shareholders, sure. But not the big ones, which comprise the majority of the people who are going to screw over Yang. You think Ichann, or any of the bank managers, mutual fund managers, hedge fund managers, etc. that have holdings in Yahoo are being run by people running to take out payday loans? Doubtful.

Re:Public companies

Actually, 82% of Yahoo's float is held by institutions and mutual funds [yahoo.com].

Re:Public companies

Welcome to Slashdot to see people who do not have a basic grasp of finance or business to rant about it.

For one, the majority of shares in most public companies today are held by institutional investors. The next big share holders tend to be PE folks (like Icahn, KKR etc), followed by insurance companies, hedge funds etc.

Secondly, you cannot have your cake and eat it too. If you went public, you did it for the money - and you can't cry foul when you do something stupid and when people hold you accountable. If you wanted your freedom, you should have stayed private. Sad, but true.

Now, one of the biggest advantages of going public is that you raise capital - and when investors put in their money, they expect returns. Now, some people like Icahn are just vultures who are looking for an excuse to make a quick buck, but most other investors are not happy, either, with the way Yahoo handled the situation.

Like or dislike does not enter business. If it makes business and strategic sense, you do it. If it does not, you don't. If you are interested in discussing morals, ethics and "feelings", you should have kept the company private and done whatever the hell you wanted. I haven't seen anything that indicates that a merger between Yahoo and Microsoft will be a bad thing. It may throw in a little more competition; however I can see why Google is worried - they run the risk of being called a monopoly if Yahoo gets bought out. At the end of the day, once you have shareholders, you have a responsibility to them. You may not like it, but you should have thought of it before you went after the greenbacks.

Re:Public companies

Not exactly...many investors are gambling rather than investing.

Only Bad if it's against shareholder interests

Microsoft who acted out of a personal interest to keep Yahoo independent. Something wrong with that? Oh, yeah... public company.

There's nothing wrong with acting in personal interests if there's a reasonable argument that it coincides with shareholder interests. And in this case, there certainly is.

Look at Google's value. Which companies are in any position at all to grab any significant share of what they're doing in the market? It's a short list. Yahoo's on it.

If you were holding onto a significant chunk of one of those companies, would you want to (a) sell it now for a quick but small profit or (b) figure out what changes you need to make in the company to have it better compete with Google and acquire value on that level?

Some shareholders might choose a. But b is certainly reasonable.

Frankly, so is the Microsoft antipathy. People like to talk as if the haters are just irrational folks who got up on the anti-MS side of the bed. Nevermind that there's a significant real technical and business history that would make any sane and competent person wary of them.

The web as a platform is open and expanding. Windows as a platform is stagnating and closed. Which do you want to be invested in for the next 10 years?

Carl Icahn's role in this...

I hope everyone realises that Carl Icahn isn't a long-term shareholder upset with how the company is being run. He thought he could run it better when Jerry Yang rebuffed MS, and AS A RESULT, bought a significant number of shares. In other words, he bought into the company for the sole purpose of getting Yang tossed out.

In the world of billionaires, not always the most friendly of folks, Icahn is about as pleasant as a rabid shark with PMS. If he gets his way, he'll install a new board, sell Yahoo to MS at $40, help gut the company, and then leave with a few more dollars in his pockets. Yahoo staff will be out of work, the search engine market will become a battle of two titans, and basically everyone will lose except for Carl and his board.

"These go to $31."

I think people are being way too slow to jump the sinking ship here - if I were a YHOO shareholder, I'd have dumped as soon as the offer hit the table and the stock hit $30. Why on earth would you hold out for $31?

Well, since you asked why:

Nigel Tufnel: Well, it's one higher, isn't it? It's not $30. You see, most blokes, you know, will be selling at $30. You're on $30 here, all the way up, all the way up, all the way up, you're on $30 in your portfolio. Where can you go from there? Where?
Marty DiBergi: I don't know.
Nigel Tufnel: Nowhere. Exactly. What we do is, if we need that extra push over the cliff, you know what we do?
Marty DiBergi: Hold out for $31.
Nigel Tufnel: 31. Exactly. One higher.

Maybe not too far off the mark...

Cheers,

Re:It's like watching ugly people kiss

Why on earth would you hold out for $31?

Well, as but one example, Carl Ichan is reported to own about 50 million shares in Yahoo ( http://biz.yahoo.com/ap/080513/yahoo_icahn.html [yahoo.com] ) so a stock increase from $30 to $31 represents a profit of about $50 million. Now, call me wacky, but that sounds like a good reason to me...

Re:It's like watching ugly people kiss

Oh yeah I feel real sorry for the guy who didn't cash out for $1,500,000,000 because he could have made $1,550,000,000

Re:It's like watching ugly people kiss

Who hasn't already written off both of these companies?

I would assume only a fool would write off two of the largest tech companies in the country (with a combined revenue of 57.33B).

or how desperately inept these two companies have become due to their size and age.

Yes because we all know the only real innovation isn't done in multi-million dollar research centers, it's done in dad's garage, duh!

Microsoft's asset is an OS that people are still locked into, but becoming violently sick of.

Yeah one would think the nightly car bombings outside of Microsoft's HQ would finally stop this 'stay the course' mentality. But for some reason people seem to enjoy using a OS on cheap hardware the runs reliably and quickly when configured properly. Oh and plays the latest games!.. We're in the twilight zone now.

Yahoo's asset is a rapidly diminishing brand and user base

I'm sure that's it. Not anything to do with years of R&D [yahoo.com] or their Publisher Network. [yahoo.com]

The guys who will eat their lunch are the Googles and Apples of the world

Yes because it's all about Google Search on OSX.

/sigh I have no problem with your mention of Google, but Apple... Really? Like for realsies? Sorry bro, I'm into computers... Not toys.

Re:It's like watching ugly people kiss

Microsoft's asset is an OS that people are still locked into, but becoming violently sick of.

That's an interesting concept, but most people don't know what an operating system is. To a majority of the purchasing public, an OS is part of the computer. Both companies (Apple, MS) are aggressively perpetuating this myth; and the consumer will very likely never realize that there's a difference.

Re:It's like watching ugly people kiss

MS doesn't gain anything they don't already have by acquiring yahoo ...Yahoo is only worth something to NOT MS.

Which may be exactly why MS is so interested in acquiring Yahoo. They do a lot of the same things. And so does Google. So, instead of MS vs. Yahoo vs. Google, it would be MS Yahoo vs. Google.

Sometimes the point isn't to expand into new markets, but to gain control of the ones you're already in.

Re:It's like watching ugly people kiss

No, it's not insightful at all. If you think it is I hope to hell you don't get mod points ever again.