Filed under: Deals, Google (GOOG), Microsoft (MSFT), Yahoo! (YHOO)
Back on January 30, Yahoo! (NASDAQ: YHOO) shareholders were just treated to disappointing December 2007 quarterly results and quite frankly, a pretty dismal outlook for at least the first half of 2008. Co-founder Jerry Yang had taken over the CEO role back in early 2007 and his unabridged enthusiasm is both admirable and nearly believable. However, the short term reality was that the US was experiencing an economic slowdown and even the best of growth companies were bound for contraction.
Microsoft (NASDAQ: MSFT) entered the picture on January 31 with a $44.6 billion offer to buy Yahoo!. All in all, Microsoft was smart in waiting for an economic slowdown before pouncing on Yahoo!. Shareholders were witnessing the stock price dwindle back to teenage levels without the prospects of share growth for at least three to four quarters out. With Microsoft’s offer, the stock rocketed back to $29, allowing for the usual $2 arbitrage delta.
Yahoo! is not and will never be comparable to Google (NASDAQ: GOOG). Google is the winner in the search engine world and the advertising/marketing revenue streams associated with the business was Google’s to own. Microsoft was the third player in this game with market share numbers hovering in the single digits. At least with yahoo! in the fold, Microsoft could become one-quarter the size of Google and at least stay in the game. It all seemed pretty simple until Yahoo! began to hedge its bets and desired to look at other alternatives.
That was over two months ago and Microsoft has become impatient. A competitive bid for Yahoo! is not forthcoming as anything above a $45 billion is nearly impossible to find. Partnerships and strategic alliances were bandied about, but let’s get real: all of these would require time and execution excellence. Immediate rewards to shareholders would be two to three years in the making. Microsoft stood by patiently, waiting for the juvenile game to play out, but its time is up.
Yahoo! shareholders now face a three week deadline to either accept Microsoft’s bid or go back to teenage prices. The choice is an easy one and Yahoo’s board of directors is running out of “alternative options.” If Microsoft is forced to go directly to a shareholder vote, Mr. Yang and his management team had better dust off their resumes because it will not be pretty.
Georges Yared writes about great growth stocks in GameOn Investing
Entries (RSS)