Friday, August 01, 2008

Now for some Micro’hard’ talk

What had started as a good ol’ peaceful offer for merger, is now turning into a rather unpleasant war of words between Steve Ballmer and the Yahoo! board of directors.
Despite an elongated period of negotiations (since Microsoft put forward their proposal to buy Yahoo! at a 62% premium to the closing price on January 31, 2008, the day preceding the announcement), the stalemate continues. Steven A. Ballmer, CEO, Microsoft Corp. said in a letter on April 7, “The goal in making such a generous offer was to create the basis for a speedy and ultimately friendly transaction.” But since speed is a pipedream still, Ballmer has threatened to take the battle to the shareholders and also that the valuation will be reduced significantly.

“Yahoo! is pulling out all the stops to try to prevent such an acquisition, primarily because I believe management really does feel that Microsoft’s $44 billion offer is too low,” feels Richard Dorfman, MD, Richard Alan Incorporated (a New York-based investment firm) and Chairman, TransMedia Institute. If first quarter numbers are good, it would signify Yahoo!’s best shot at gaining some power in negotiations with Microsoft ahead of its Saturday deadline to accept the software company’s nearly $44-billion takeover offer. A good Q1 would mean that Ballmer eats crow.

Even if a combined Microsoft-Yahoo! is unable to dethrone Google as the online advertising leader, the combined company would still be a very substantial player in this extremely profitable business. The present Yahoo! sentiment is tough to agree with but the situation shows it all. Others are equally getting vehement at the situation. “At the moment, Microsoft is mired in a three-dog fight to acquire Yahoo!”, reveals Marc Edelman, a New York law professor with an expertise in antitrust law. At present it’s competing against Google, which has tons of free cash flow and AOL, which presents lower antitrust risk. At least publicly, Microsoft is the only company that has submitted a formal acquisition bid. Plus, of these three companies, Microsoft may stand to benefit most based on synergies between Microsoft’s core business units and Yahoo!’s web-based capabilities. “Yahoo! will eventually sign a sale agreement with Microsoft but is using Google and AOL to try to convince Microsoft to both increase its bid price and incur the antitrust risk of regulators rejecting the deal on antitrust grounds,” adds Marc.

For Complete IIPM Article, Click on IIPM Article

Source : IIPM Editorial, 2008
An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative
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3 comments:

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