No more Mr. Nice Guy for Microsoft?
Now that its friendly offer for Yahoo expired on Saturday, Microsoft has two options: launch a hostile takeover attempt or withdraw and seek other ways to grow its online advertising biz. The tech giant has given every indication it will go the hostile route and take its case directly to Yahoo shareholders.
Under this scenario, there is no guarantee how much it might pay for Yahoo.
Microsoft offered $31 per share in a late January bid valued at $44.6 billion, but Yahoo continues to maintain that the company is worth more than that. Last week, co-founder Jerry Yang cited its first quarter earnings to bolster the case for a bigger bid, but Microsoft didn’t see it the same way. On Friday, chief exec Steve Ballmer called the original cash-and-stock offer “quite generous,” pointing out that it was roughly 80 times earnings.
Ballmer then reiterated the company’s aim to take the plan directly to shareholders should Yahoo fail to warm up to the offer by Saturday’s deadline.
Microsoft, which set the April 26 deadline earlier this month, hasn’t been sitting by idly waiting for Yahoo to capitulate; it is said to have assembled a slate of candidates for the Yahoo board in the event of a proxy fight. Ten directors are up for re-election at Yahoo’s next shareholders meeting, which should be held soon; last year’s was in June.
Although Microsoft could still walk away — chief financial officer Chris Liddell mentioned that as a possibility during Thursday’s earnings call — others believe the acquisition remains enticing as a way to grow Microsoft’s lagging online ad biz. During the software giant’s most recent quarter, losses in its online services segment widened to $228 million from $171 million in the year-earlier period, although revenue jumped 40% to $843 million in part due to the acquisition of aQuantive.
Yahoo is the No. 2 search engine behind Google, and it posted solid, if not spectacular, earnings last week. Profit held virtually steady at $141.2 million excluding a non-cash gain, while revenue rose 9% to $1.82 billion.
Google, meanwhile, surprised the doubters with the strength of its last quarter as profit jumped 31% to $1.31 billion and revenue shot up 42% to $5.19 billion.
The Yahoo bid has attracted its share of detractors, and it’s not clear how long Microsoft will be willing to pursue the fight. Last week, Liddell lamented that while Microsoft has always believed “speed is of the essence,” Yahoo’s response “has been anything but speedy” (Daily Variety, April 25).
He promised an update “as appropriate” on the company’s stance this week, citing a shareholder offer and withdrawal to focus on other opportunities as possibilities. Either way, execs made clear, the company plans to beef up its bid for a bigger share of online advertising coin.
Yahoo declined to comment Sunday on the passing of the deadline. The company has been exploring alternate deals with AOL and News Corp. Netco just concluded a test to outsource some of its advertising to Google.