I think MSFT has already won

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Henry Blodget of Silicon Alley Insider says that he has heard rumours of at least one and possibly two other bidders who had offers all ready to go for Yahoo before Microsoft jumped in and spoiled the party, and Paul Kedrosky says he has also heard such talk — supposedly private equity groups, likely out of New York, looking to take advantage of Yahoo’s depressed stock price to launch a takeover and then pay for it by selling off bits and pieces.

Update: News Corp. may also be considering a bid of some kind, Mike Arrington reports.

Regardless of whether there are other bidders or not, I don’t see how they can afford to top Microsoft’s offer. Sure, they could probably raise the money to boost their bid, but would it be worth it? The fact is that Yahoo is worth more to Microsoft than it is to anyone else — Microsoft can justify paying a much higher price because it will (theoretically at least) get enough in the way of synergies out of the deal to make it worthwhile.

How is a private equity bidder going to justify a 62-per-cent premium? There just isn’t that much value in Yahoo for anyone else, IMHO.

Comments (6)

  1. dave wrote::

    What's the extra value to Microsoft?

    If anything it seems the other way around. They both have search, mail, finance, etc.

    They duplicate each other in so many ways. Would both brands, MSN and Yahoo survive?

    Imagine all the time they'd spend internally arguing about which way to go — collapse two brands into one or have two brands going forward.

    In the end the Yahoo brand will disappear, it always goes that way, and then what did Microsft pay all the money for?

    I don't think you've made your case. Imho.

    Saturday, February 2, 2008 at 4:27 am #
  2. mathewi wrote::

    I'm not saying it would be easy, Dave. The post was really just about whether Microsoft would be able to get more value out of buying Yahoo than some private equity group, and I think it would. Regardless of whether the Yahoo brand survives or not — and it arguably has a stronger online presence than Windows Live does — I think the search-advertising business is worth more to Microsoft than anyone else.

    Saturday, February 2, 2008 at 9:15 am #
  3. Simon wrote::

    Why is everyone so excited about “62% premium”???
    That was at the stocks 4 yr low price…
    The stocks 52 week high was 34 and was trading at 31 just 3 months ago. It was pummelled with the market and Jerry Yang's poor CC performance.. but the “62% premium” makes a nice headline.. but I dont think the price is outrageous. Being a longterm shareholder I would hold out for more.. and/or outsource search to Google and attempt to stay indepedent.

    Saturday, February 2, 2008 at 10:58 am #
  4. Robert Dall wrote::

    I am really worried about this. I love del.icio.us , flickr and have had a yahoo mail address since 2000 but I would hate to see what Microsoft would do with Flickr and del.icio.us. They work so well right now, Mircosoft has been famous for having anything but a hands off approach. Look what happend to iview media pro. Great program that was completely messed with once Microsoft purchased it.

    Say it ain't so!!!!

    Saturday, February 2, 2008 at 1:51 pm #
  5. David Gratton wrote::

    I think you are right, Mathew.

    Most mergers of this sort actually do not increase shareholder wealth. They are often a sign that management is floundering to define direction. However, I don't believe that is the case with MSFT. They have desperately been trying to build community and Web services (yes for ad revenue, but also for extending their platform). I think it is safe to say that they have not done a very good job at it. So, buying Yahoo! makes a ton of sense in my opinion. It is not a diversion or a company desperately looking to 'jump on board” (hrm .. AOL/TIME).

    Just as Google dropped it's video platform to buy YouTube, MSFT dropping MSN to buy Yahoo makes sense.

    Sunday, February 3, 2008 at 2:18 pm #
  6. David Gratton wrote::

    I think you are right, Mathew.

    Most mergers of this sort actually do not increase shareholder wealth. They are often a sign that management is floundering to define direction. However, I don't believe that is the case with MSFT. They have desperately been trying to build community and Web services (yes for ad revenue, but also for extending their platform). I think it is safe to say that they have not done a very good job at it. So, buying Yahoo! makes a ton of sense in my opinion. It is not a diversion or a company desperately looking to 'jump on board” (hrm .. AOL/TIME).

    Just as Google dropped it's video platform to buy YouTube, MSFT dropping MSN to buy Yahoo makes sense.

    Sunday, February 3, 2008 at 7:18 pm #

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