Archive notice: This article was originally published on April 2, 2008. Links and embedded videos are preserved as part of the historical record.
US software giant Microsoft is apparently preparing for a gruelling takeover battle for troubled portal giant Yahoo. As the Wall Street Journal reports, the Redmond company does not intend to raise its 44.6-billion-dollar takeover offer, made two months ago, any further. Although neither company is currently providing information on the ongoing progress of negotiations, internal sources say Microsoft intends to play for time. Meanwhile, during its latest roadshow, Yahoo is reaffirming to its own shareholders its claim to a higher price.
“The planned takeover is currently turning out to be a waiting game for both sides. Of course Yahoo wants to convince investors that, given its ambitious growth plans, it is worth continuing to wait for a higher offer. On the other hand, Microsoft also knows that there are hardly any alternative buyers for the company,” RZB analyst Christian Hinterwallner says in an interview with news service pressetext.de. According to the expert, however, Microsoft will raise its offer a little in the long term to show that Yahoo’s existing management and corporate culture will not be destroyed. “For example, giving the impression that it wants a hostile takeover would certainly be completely counterproductive here,” Hinterwallner says.
Insiders see Yahoo’s delaying tactics as unhelpful. After all, approval of industry leader Google’s 3.1-billion-dollar purchase of online advertising marketer DoubleClick puts the corporation under massive pressure in relation to Microsoft. The monopoly position for advertising customers created by Google in this way could make Yahoo’s strategy of continuing to insist on a higher bid from Microsoft appear questionable. “The Google-DoubleClick deal gives Microsoft additional firepower to prevail over Yahoo,” industry portal Cnet quoted Nedham & Co. analyst Mark May as saying.
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Microsoft’s firm determination to stick to the current takeover bid is being commented on by people close to the company to the effect that “there is no reason to bid against ourselves”, the report says. According to experts, Microsoft’s strategy of playing for time in the Yahoo poker game could prove promising. The existing offer could also become more lucrative, since an economic downturn is expected in the USA in the long term and the stock-market environment is currently volatile. Other Microsoft insiders believe that Yahoo has not yet accepted the offer only because Microsoft has so far not submitted a list of proposals for replacing Yahoo’s current managing directors.
Informed Yahoo circles have repeatedly indicated that 40 dollars per share would be “acceptable” for the company. As early as the end of January, Microsoft had submitted a purchase offer of 31 dollars per Yahoo share. This was rejected shortly afterwards as “undervalued”, although, at the time it was made, the aforementioned 44.6 billion dollars was around 60 percent above Yahoo’s stock-market value at the time. The offer now amounts to 42 billion dollars. According to experts, a possible settlement figure could be around 35 dollars per share. Analysts see Microsoft’s rigid stance as a response to Yahoo’s announcement that it would work with US media corporation Time Warner to create a media alternative to Microsoft.
