Monday, April 07, 2008

Yahoo to Microsoft: We're still seriously F'ed up, so go ahead and do ur thang

So, Yahoo receives yet another wake up call from Microsoft and responds as would any self-respecting college student being woken up after too much partying and not having a credible plan for their life: Go away and leave us alone, unless you want to give us more money than even a stupid person would give us. See Yahoo!'s Board of Directors Responds to Latest Microsoft Letter. Microsoft's implied auto-answer: Fat chance, go ahead and get a few more winks of your beauty rest, but then be prepared to meet your fate. I suspect that Microsoft may send one more letter before their deadline, but more likely we will see a series of public and private statements touting the value of the deal to "shareholders." Whether Yahoo finally wakes up and smells their dying roses remains to be seen.

To be clear to Yahoo shareholders, Yahoo may have a much greater future value, but that is true for a lot of companies, including Microsoft. The price for a stock is supposed to be based on future value discounted to present value. If Yahoo stock feels as if it is discounted too heavily, that is probably simply because investors do not share the mistaken vision of management and its current strategy. You were already offered a significant premium. The financial markets and economy have deteriorated since then. Sure, everything will bounce back, eventually, but put simply, Yahoo has been damaged goods for quite some time, so any transaction will of course be at a discount to management's perceived "full" value.

The Yahoo letter makes it sound as if price was the major impediment, but I am deeply skeptical. Unless, Yahoo management really is truly lost off in the weeds, they have to know in their heads and hearts that it will be a lot easier to monetize the current value of Yahoo within the context of Microsoft than their current strategy or any of the "alternatives" that they may be considering. Microsoft gives them an opportunity to scale that they would not otherwise have. If they play their cards right, they can take control of MSN and build a new Yahoo that is much beefier and grander than anything else they could do as a standalone company. They now have an excellent opportunity to negotiate the terms of their integration. I suspect that they do know this, but ego, image, and pride in their brand are probably the major impediments to simply letting the deal go forward.

So, wake up you sleepy-headed Yahooligans and get yourselves a real job!

-- Jack Krupansky

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