4 ms·

Microsoft Withdraws Yahoo Bid; Walks Away From Deal

78 points by raghus 18y ago

rms 18y ago
Ballmer says clearly in the letter that they will not be pursuing a proxy nomination battle. Do you think he is telling the truth?
- jorgeortiz85 18y ago
  His explanations seem credible. There are a lot of "poison pills" that Yahoo can swallow between the start of a proxy battle and the installment of MSFT-friendly management.
deleted 18y ago
[deleted]
gscott 18y ago
I believe Microsoft just couldn't afford Yahoo because of Vista. If Vista sold well and there was mass adoption then MS would have had the free cash flow to aquire Yahoo without having to borrow. If Yahoo next year is at $20 a share, Microsoft may try again. (edited to cut out unimportant sections)
- byrneseyeview 18y ago
  "They can't pull out all of there investments right now, it would devastate the stock market." Really? Their balance sheet doesn't show a huge amount of long-term investments. And yesterday, $1.9 billion worth of Microsoft stock alone changed hands -- it would be very hard for them to upset the market selling gradually. In addition, they're generating at least $4 billion in operating cash flow each quarter, which would support a lot of debt at a low rating. Finally, they could issue stock. Free cash flow is not the issue.
  - gscott 18y ago
    If Microsoft issues more stock it would dilute it's shares which causes some people to pull out of the stock further sending it's price down. I really don't believe they would wipe out hundreds of millions / billions of shareholders value for Yahoo. You just can't take billions of dollars in investments out without proper planning. Just because they can cash out doesn't mean that is a great idea. They would have nothing in reserves. One of the founders of Microsoft, Paul Allen was really big on having reserves that they would not spend and I would be suprised if that attitude didn't still prevail today. Yahoo doesn't throw of enough cash either. Microsoft would have to fire half of Yahoo's employees (think Compaq computers), which would cause customers to run for the hills expecting the worst to happen to customer service and other functions. Yahoo right now is just too expensive for MS.
    - phaedrus 18y ago
      Curious. What do you think - has Microsoft been so successful in business at least in part because of its insistence per Paul Allen of keeping large cash reserves, larger than most companies keep on hand? (MiniMSFT blogger said something like, "Why? We're not a bank!") Or is it simply that Microsoft has held a very lucrative monopoly position for many years and just makes more money than it knows what to do with? I.e., perhaps its habit of keeping large cash reserves are just an effect of its success and not any kind of cause of it? The reason I pose the question is that I have been forming a layman's theory that in fact it is all about the cash, even as much for a huge company as it is for a small mom and pop store; that as long as a company has cash on hand it can go on, and when it runs out of cash the end is coming even if it takes years in a downhill slide. If you take corruption as a given, I suspect that all the accoutrements of big-company strategies like pursuing growth over profitability, borrowing money to run at a loss, etc., are nothing more than smokescreen thrown up by upper management to make it look like they're doing a good job when they're really bleeding the company. Rather than being a waste of resources, I rather wonder if keeping a large cash reserve is like a protective armor to keep a company from having to borrow at interest during rough periods. Is this completely off the mark?
      - 18y ago
JohnN 18y ago
Personally, if I was a Yahoo shareholder I would be calling up my lawyers to start suing the Yahoo board. Financially this deal is clearly good for shareholders coming at a 60% premium. I can't personally see why Yahoo would be worth $38 a share. The job of the board is to do what's in the best interest of shareholders but ultimately it personally seems this deal was not rejected because of the numbers but because of the sentimental attachment to Yahoo independence. Expect some litigation
- edw519 18y ago
  I don't think Microsoft shareholders should be feeling all that comfortable, either. This is a company with virtually unlimited resources (talent, cash, experience, partners) that wants to win every war, but can't seem to win even a single battle as the world passes by. Whats missing? Leadership. Time for vision to replace bullying. Stay tuned...
  - goodkarma 18y ago
    In several markets - such as search, search marketing (i.e. pay per click advertising), web-based applications (i.e. Google Docs or whatever MS calls it), etc., Microsoft has really dropped the ball. The two things they lack are respect for their competition, and respect for new ideas. The ideas were there, but Microsoft didn't listen. Their competitors did. Probably the result of Microsoft getting huge and evil and not caring about their customers. They didn't notice that technology was passing them by. And then there was Google. When you get a lot of smart people working on something and give them a head start, it makes it very difficult for a competitor to catch up. :) I don't think Yahoo is much better. If the average Yahoo shareholder understood how bad "Panama" is given all the hype it got, they probably would have sued Yahoo by now.
- bkbleikamp 18y ago
  People would have said the same thing in 2003-2004 if someone offered $16 a share for AAPL...now they'd look stupid.
  - 18y ago
mronge 18y ago
I wonder if they are walking away from the deal so the stock tumbles, and they can come back in a quarter or two and try and nab Yahoo then. I think Oracle actually did this with Peoplesoft?
- ojbyrne 18y ago
  That would be my bet. Wasn't it BEA that Oracle did that to? Perhaps they did it more than once.
- jmzachary 18y ago
  This definitely puts the spotlight on Yahoo to start performing PDQ. If they are the same track six months from now that they are on today, you can expect some real gnashing of teeth among the shareholders. On the other hand, Microsoft comes out of this looking pretty good (among the none geek crowds). They tried to buy this poor company at a 60-70% premium. I wonder if MS has another acquisition target in their sites .
nickb 18y ago
One thing's for sure... this news is great for startups! Having MS and Y! combined would have reduced the number of exit points for startups. Also, it would have resulted in massive layoffs which would have further reduced the number of acquisitions that they would have made as a combined company. At least now you still have three major players to negotiate with.
- tptacek 18y ago
  Maybe. But the other way to look at it is, MSFT has an NIH culture and isn't a prolific acquirer; MSFT-YHOO combined could have produced more acquisitions than MSFT and YHOO apart.
  - phaedrus 18y ago
    I don't follow your logic: if Microsoft has an NIH culture why would the combined Microsoft+Yahoo do more acquistions than Yahoo did independently? Remember who would be consuming who here. Isn't it more likely that the larger Microsoft would replace Yahoo's culture than it would be that Yahoo's culture would mollify Microsoft's?
    - tptacek 18y ago
      Acquiring cultures get co-opted by their acquired companies all the time; think VW and Audi. In this case, a much-needed culture shock to Redmond was almost an explicit perk of the deal for MSFT. It's not hard for me to imagine that a MSFT with a revitalized web strategy could go on to acquire more companies than they will on their own.
lyime 18y ago
This is extreamly unfortunate to yahoo shareholders. At the current state I don't see how yahoo can create value in the company. I wonder how bad the stock will fall starting monday
lyime 18y ago
This is extreamly unfortunate to yahoo shareholders. At the current state I don't see how yahoo can create value in the company. I wonder how bad the stock will fall starting monday
lyime 18y ago
This is extreamly unfortunate to yahoo shareholders. At the current state I don't see how yahoo can create value in the company. I wonder how bad the stock will fall starting monday
lyime 18y ago
This is extreamly unfortunate to yahoo shareholders. At the current state I don't see how yahoo can create value in the company. I wonder how bad the stock will fall starting monday
- lyime 18y ago
  Thats a lot of bad Karma. I apologize, i was posting from my phone and it posted multiple times. It was non-intentional.
lyime 18y ago
This is extreamly unfortunate to yahoo shareholders. At the current state I don't see how yahoo can create value in the company. I wonder how bad the stock will fall starting monday
lyime 18y ago
This is extreamly unfortunate to yahoo shareholders. At the current state I don't see how yahoo can create value in the company. I wonder how bad the stock will fall starting monday
lyime 18y ago
This is extreamly unfortunate to yahoo shareholders. At the current state I don't see how yahoo can create value in the company. I wonder how bad the stock will fall starting monday
lyime 18y ago
This is extreamly unfortunate to yahoo shareholders. At the current state I don't see how yahoo can create value in the company. I wonder how bad the stock will fall starting monday
ideas101 18y ago
This is the best thing that could have happened for everyone (MS, Yahoo, Yahoo's stakeholders, Google, Apple and all new startups) ... there are 3 major stakeholders (shareholders, employees and end users) and two out of 3 stakeholders weren't happy with the deal - it would have been irreversible disaster if MS bought yahoo by borrowing money from outside...i think MS knew that Yahoo won't come below $37 and walking away is the best face saving tactic - it was like heads i win, tale you loose... it seemed that MS was having cold feet after realizing that yahoo brains and end users may leave the company after acquisition. Also it was uphill battle to integrate 2 businesses with totally different culture and technology. MS can do much better with $45Billion.
dangoldin 18y ago
And that is a lesson to us all that we should have private companies.
- neilc 18y ago
  Really? How does that follow?
  - phaedrus 18y ago
    I think he means you can't (AFAIK - please correct me) do a hostile takeover of a private company, at least not in the same manner. because in a privately owned company there are no public stockholders to appeal to; the owner and the manager of the business are one and the same. Really though, what this really is is an example of why you should have a dual-class share system where there are "investment shares" and "voting shares", and investing doesn't give you automatic voting rights. Yahoo for some reason didn't have that, and it put the board especially at risk to hostile takeover.
    - dangoldin 18y ago
      Exactly. Founders tend to think that the holy grail is going public but then you'd have to worry about shareholders and short term growth. It would be perfectly fine to stop right before going public and run the company the way you wanted. Cargill is a private company with $67B in revenue in 2004 so it's not a question of generating the money (http://www.forbes.com/lists/2005/21/5ZUZ.html http://www.forbes.com/lists/2005/21/5ZUZ.html).
      - aneesh 18y ago
        Founders want to go public to cash out, not because they want to run a publicly traded company. In fact, many leave the company after IPO.
    - rp 18y ago
      I guess you have never heard of a reverse merger: http://en.wikipedia.org/wiki/Reverse_takeover http://en.wikipedia.org/wiki/Reverse_takeover http://reversemergerblog.com/ http://reversemergerblog.com/
grantc 18y ago
Yahoo was in the headlights before. Now they're just roadkill. I think a MSFT+YHOO merger would have been massive fail, but it's Microsoft that ends up dodging the bullet here. Yahoo just takes one. Where exactly is Yahoo relevant anymore?
misterbwong 18y ago
I'm probably way off base, but it seems like MSFT is doing this to decrease the price of YHOO. 1. Pull out offer 2. Shareholders complain 3. Markets kill YHOO 4. MSFT comes back and buys cheaper?

78 points by raghus 18y ago

rms 18y ago

Ballmer says clearly in the letter that they will not be pursuing a proxy nomination battle. Do you think he is telling the truth?

jorgeortiz85 18y ago
His explanations seem credible. There are a lot of "poison pills" that Yahoo can swallow between the start of a proxy battle and the installment of MSFT-friendly management.

deleted 18y ago

[deleted]

gscott 18y ago

I believe Microsoft just couldn't afford Yahoo because of Vista. If Vista sold well and there was mass adoption then MS would have had the free cash flow to aquire Yahoo without having to borrow. If Yahoo next year is at $20 a share, Microsoft may try again. (edited to cut out unimportant sections)

byrneseyeview 18y ago
"They can't pull out all of there investments right now, it would devastate the stock market." Really? Their balance sheet doesn't show a huge amount of long-term investments. And yesterday, $1.9 billion worth of Microsoft stock alone changed hands -- it would be very hard for them to upset the market selling gradually. In addition, they're generating at least $4 billion in operating cash flow each quarter, which would support a lot of debt at a low rating. Finally, they could issue stock. Free cash flow is not the issue.
- gscott 18y ago
  If Microsoft issues more stock it would dilute it's shares which causes some people to pull out of the stock further sending it's price down. I really don't believe they would wipe out hundreds of millions / billions of shareholders value for Yahoo. You just can't take billions of dollars in investments out without proper planning. Just because they can cash out doesn't mean that is a great idea. They would have nothing in reserves. One of the founders of Microsoft, Paul Allen was really big on having reserves that they would not spend and I would be suprised if that attitude didn't still prevail today. Yahoo doesn't throw of enough cash either. Microsoft would have to fire half of Yahoo's employees (think Compaq computers), which would cause customers to run for the hills expecting the worst to happen to customer service and other functions. Yahoo right now is just too expensive for MS.
  - phaedrus 18y ago
    Curious. What do you think - has Microsoft been so successful in business at least in part because of its insistence per Paul Allen of keeping large cash reserves, larger than most companies keep on hand? (MiniMSFT blogger said something like, "Why? We're not a bank!") Or is it simply that Microsoft has held a very lucrative monopoly position for many years and just makes more money than it knows what to do with? I.e., perhaps its habit of keeping large cash reserves are just an effect of its success and not any kind of cause of it? The reason I pose the question is that I have been forming a layman's theory that in fact it is all about the cash, even as much for a huge company as it is for a small mom and pop store; that as long as a company has cash on hand it can go on, and when it runs out of cash the end is coming even if it takes years in a downhill slide. If you take corruption as a given, I suspect that all the accoutrements of big-company strategies like pursuing growth over profitability, borrowing money to run at a loss, etc., are nothing more than smokescreen thrown up by upper management to make it look like they're doing a good job when they're really bleeding the company. Rather than being a waste of resources, I rather wonder if keeping a large cash reserve is like a protective armor to keep a company from having to borrow at interest during rough periods. Is this completely off the mark?
    - 18y ago

JohnN 18y ago

Personally, if I was a Yahoo shareholder I would be calling up my lawyers to start suing the Yahoo board. Financially this deal is clearly good for shareholders coming at a 60% premium. I can't personally see why Yahoo would be worth $38 a share. The job of the board is to do what's in the best interest of shareholders but ultimately it personally seems this deal was not rejected because of the numbers but because of the sentimental attachment to Yahoo independence. Expect some litigation

edw519 18y ago
I don't think Microsoft shareholders should be feeling all that comfortable, either. This is a company with virtually unlimited resources (talent, cash, experience, partners) that wants to win every war, but can't seem to win even a single battle as the world passes by. Whats missing? Leadership. Time for vision to replace bullying. Stay tuned...
- goodkarma 18y ago
  In several markets - such as search, search marketing (i.e. pay per click advertising), web-based applications (i.e. Google Docs or whatever MS calls it), etc., Microsoft has really dropped the ball. The two things they lack are respect for their competition, and respect for new ideas. The ideas were there, but Microsoft didn't listen. Their competitors did. Probably the result of Microsoft getting huge and evil and not caring about their customers. They didn't notice that technology was passing them by. And then there was Google. When you get a lot of smart people working on something and give them a head start, it makes it very difficult for a competitor to catch up. :) I don't think Yahoo is much better. If the average Yahoo shareholder understood how bad "Panama" is given all the hype it got, they probably would have sued Yahoo by now.
bkbleikamp 18y ago
People would have said the same thing in 2003-2004 if someone offered $16 a share for AAPL...now they'd look stupid.
- 18y ago

mronge 18y ago

I wonder if they are walking away from the deal so the stock tumbles, and they can come back in a quarter or two and try and nab Yahoo then. I think Oracle actually did this with Peoplesoft?

ojbyrne 18y ago
That would be my bet. Wasn't it BEA that Oracle did that to? Perhaps they did it more than once.
jmzachary 18y ago
This definitely puts the spotlight on Yahoo to start performing PDQ. If they are the same track six months from now that they are on today, you can expect some real gnashing of teeth among the shareholders. On the other hand, Microsoft comes out of this looking pretty good (among the none geek crowds). They tried to buy this poor company at a 60-70% premium. I wonder if MS has another acquisition target in their sites .

nickb 18y ago

One thing's for sure... this news is great for startups! Having MS and Y! combined would have reduced the number of exit points for startups. Also, it would have resulted in massive layoffs which would have further reduced the number of acquisitions that they would have made as a combined company. At least now you still have three major players to negotiate with.

tptacek 18y ago
Maybe. But the other way to look at it is, MSFT has an NIH culture and isn't a prolific acquirer; MSFT-YHOO combined could have produced more acquisitions than MSFT and YHOO apart.
- phaedrus 18y ago
  I don't follow your logic: if Microsoft has an NIH culture why would the combined Microsoft+Yahoo do more acquistions than Yahoo did independently? Remember who would be consuming who here. Isn't it more likely that the larger Microsoft would replace Yahoo's culture than it would be that Yahoo's culture would mollify Microsoft's?
  - tptacek 18y ago
    Acquiring cultures get co-opted by their acquired companies all the time; think VW and Audi. In this case, a much-needed culture shock to Redmond was almost an explicit perk of the deal for MSFT. It's not hard for me to imagine that a MSFT with a revitalized web strategy could go on to acquire more companies than they will on their own.

lyime 18y ago