Will The Microsoft Hammer Fall This Week?
Michael Arrington
23 comments »
“If we have not concluded an agreement within the next three weeks, we will be compelled to take our case directly to your shareholders, including the initiation of a proxy contest to elect an alternative slate of directors for the Yahoo! board.”
- Microsoft’s Steve Ballmer on April 5, 2008
That three week deadline expired on Saturday. So what happens next?
Citigroup’s Mark Mahaney says in an April 25 report there is a 45% chance of a merger at a price somewhat higher than the initial bid, a 40% chance that Microsoft will go hostile, a 10% chance that Microsoft walks away, and a 5% chance for deal at the original bid to be accepted. That means he thinks a deal in some form is 90% likely.
Marc Andreessen lays out the “go hostile” game plan in a blog post partially written by two merger and acquisition attorneys. If that’s the way this goes, Microsoft needs to announce their alternate board slate and finalize the lobbying of shareholders.
What’s surprising is that talk of the Google alternative has died down. Yahoo has shown a willingness to go scorched earth throughout this ordeal. The announced trial deal with Google went very well; our sources say Yahoo had 85%-100% revenue gains compared to running their own ads.
Certainly there are regulatory issues around the deal. It’s also clear, however, that Yahoo could possibly get away with a deal that continues to give Google just a small percentage of overall queries. Such a deal could conceivably pass regulatory review. And Yahoo can simply direct the highest value queries to Google. In theory, directing even 10-20% of total searches to Google could produce nearly the same revenue gains as deal to outsource 100% of search queries.
Is a Google deal good for Yahoo? As late as January, Yahoo was saying no. In their Q4 earnings call Yahoo argued that the best way to build long term shareholder value was by having their own search advertising platform. And last October, during the Q3 earnings call, CEO Jerry Yang said “We believe having a principal position in both search and display advertising is critical to creating that long-term value.”
Now, though, Yahoo says their Google partnership is a test to explore ways to “maximize stockholder value.”
It’s Microsoft’s move. Expect something by mid week.
Microsoft can start an IP war against Yahoo! They can block access to its sites and services through their network. I don’t think there is something more they can do in this matter!!
I’m beginning to think it wouldn’t matter much for MS if they did get Yahoo or not. I just signed up for Yahoo’s version of AdWords and can see one reason they have trouble keeping up with Google. Google makes it so easy to advertise - and to monetize - it’s frustrating to work with other ad networks. MSN advertising is not much better than Yahoo. Why can’t Yahoo embrace the small web publisher in the way Google can with their content network?
45% chance of a deal, 40% chance of MS going hostile and 10% MS walks away….
Adds up to 105%
Looking at how this deal is playing out, it certainly looks like Microsoft is becoming a puppet master that likes to tease.
On the other hand, this whole deal makes Yahoo look really bad. Perhaps they should widen and explore more options. Forget about plan B or plan C, but come out with a team that generates at least a dozen alternatives.
My personal opinion - a company that is desperate waiting to merge but with the other company teasing too much - And yet still being so patient/understanding?! It’s gonna affect some “self-respect”, dignity and etc.
90% for a deal here, 40% or less there (Blodget on SAI), what a gap!
If Microsoft failed to acquire yahoo,
what the alternative opportunity for Microsoft?
I think Microsoft will have no choice but raise thier offer price, Later yahoo share holders will approve and Microsoft will aquire with lot of regulatory hurdles.
Partnering with Google for now is like small resistance from Yahoo management not to go with Microsoft. This is very interesting as Microsoft reported decline in revenues where as Google and yahoo are flying with increase in earnings.
http://www.tech-exposed.com
MS has gotta make this deal happen. Google is lurking in the wings to either to raise up the price to weaken Microsoft or actually buy yahoo. Either way it spells trouble.
@Judo:
LOL… obviously math isn’t one of your strong suits. http://www.google.com/search?q=45+%2B+40+%2B+10
How real are these supposed regulatory restrictions or hurdles. I’ve seen a lot of mention, but just wondering what exactly the problems would be. Is it just the size of the combined search capabilities? Either way, its not monopolistic given Google. Or do most people think these are all non-issues but just going to require paperwork and adminstrative wranling?
I am worried about Internet overall. if MS gets in what will happen to yahoo services ? Will MS remove services that are redundant ? Will it merge them ?(This is more or less impossible both are on different platforms) Will MS support Yahoo Open Strategy (No for sure)?
Overall it will kill yahoo’s remaining innovative part
I dont think Microsoft will get it done, we’ll see
I actually think that in the end MS will get the deal. Unless Yahoo! dramatically goes in another direction like the Google way.
Yes I think MSFT will make it happen — they need to, to compete with Google.
How can someone come up with the percentages mentioned by Mark Mahaney will always remain a mystery to me. Its similar to saying, GOOG will hit $600 by end of year 2009…. heh….
MSFT will go hostile on them and I also believe that Google will have really no match in the search marketing space - they’ll still own the largest amount and i’m sure people will turn to Google more and more - especially with word of mouth - if they want the Yahoo! users, they need to provide content like Yahoo, if they want the MSN users - they just need faster adoption of their properties like MSN hotmail, messenger, etc.
Microsoft WILL own Yahoo! but I think that Google will beat them down fast