Archive notice: This article was originally published on February 28, 2008. Links and embedded videos are preserved as part of the historical record.
The handling of Microsoft’s takeover offer is fuelling the anger of Yahoo shareholders. Seven shareholders have now filed lawsuits against the Internet search engine operator, as Yahoo states in its annual report to the US Securities and Exchange Commission, the SEC. One of the main allegations is that Yahoo has failed to agree on a takeover with potential interested parties, both in the case of Microsoft and in the past. Yahoo, by contrast, argues that Microsoft’s takeover offer has caused not only considerable distraction within the company but also uncertainty that could adversely affect its business.
The lawsuits target the company’s board and accuse it above all of breaching fiduciary duties. The report does not reveal which shareholders now intend to take legal action. “If these are major investors, this could put massive pressure on Yahoo’s management,” says Erste Bank analyst Ronald Stöferle in an interview with news service pressetext.de. Another allegation by the plaintiffs is that Yahoo rejected Microsoft’s offer without finding out whether Microsoft would have been willing to consider further options and concessions. The defendants were therefore not acting in the shareholders’ best interests.
Microsoft’s takeover offer is, and could continue to be, a distraction for the search engine operator’s management and employees, Yahoo writes in its SEC report. The offer has also involved considerable time and resources and could continue to do so. The uncertainty caused among employees could furthermore have a negative impact on retaining key staff and adversely affect the recruitment of new specialists. There is also a risk that the hostile takeover offer could negatively influence relationships with customers and business partners, who might terminate contracts, fail to renew them or decline to enter into them.
“Yahoo has had problems in the past recruiting talent in the battle for the best minds. However, everyone applying for a job in this industry knows that there will be another massive consolidation process and that only one or two major players will remain,” Stöferle explains. It was therefore rather unlikely that the takeover offer could have additional effects on recruiting new employees. Effects on business relationships were also difficult to imagine. After Yahoo rejected Microsoft’s takeover offer in mid-February on the grounds that the offered price of 44.6 billion dollars was below the company’s value, the software giant made another approach last week. Microsoft promised not to cut jobs in the event of a takeover.
