Friday, April 04, 2008

Should Microsoft lower its bid for Yahoo?

There are news reports that Microsoft is considering lowering their bid for Yahoo. I am skeptical, but who knows. Even as a Microsoft shareholder I am of mixed mind. On the one hand doing the deal for less money is great, but OTOH the ultimate business value of the deal could be seriously damaged if the employee shareholders of Yahoo feel like they are getting completely screwed. There has to be some balance.

The Bloomberg article entitled "Microsoft May Cut Bid for Yahoo, People Familiar Say" strongly suggests that a cut in price is under consideration:

Microsoft Corp. is examining whether to cut its $44.6 billion offer for Yahoo! Inc. because a U.S. economic slowdown has hurt the Internet company's business, according to two people with knowledge of the matter.

As does the Reuters article entitled "Microsoft evaluating Yahoo bid: sources" which says:

Microsoft Corp is evaluating its bid for Yahoo Inc because the Internet company may have lost value since Microsoft made its offer, people familiar with the matter said on Friday.

...

The sources told Reuters that Yahoo has lost key personnel, making the company less valuable, while generous severance packages it handed out to executives and full-time employees in the case of a takeover have made it more expensive.

Meanwhile the New York Times article entitled "Microsoft Said to Be Standing Pat on Yahoo" suggests the opposite:

... Microsoft is not considering lowering its offer or withdrawing it all together, the person said.

I have no idea what is really going on, but for now, as a Microsoft shareholder, I would like to see the original offer kept intact. OTOH, if the economy and Yahoo's business deteriorate a lot further, then a new value should be worked out for the deal, at a significantly lower value.

In other words, there is a positive incentive for Yahoo to get the deal done sooner.

And as I have written before, I do not think that money is the real obstacle, but how to protect the value of the Yahoo brand and image and how to deal with the egos of the founders.

-- Jack Krupansky

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