Microsoft Walks Away from Yahoo Bid

Terry Olaes

Terry Olaes

I Used to be the [H] News Guy
Joined
Nov 27, 2006
Messages
4,646
Looks like the pundits that thought Microsoft would increase their bid were wrong. Microsoft just withdrew the offer, citing that Yahoo wanted too much money.

"After careful consideration, we believe the economics demanded by Yahoo! do not make sense for us, and it is in the best interests of Microsoft stockholders, employees and other stakeholders to withdraw our proposal," said Ballmer.
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Owned. I can't wait to see what happens to Yahoo now.
 
Good, it wasn't worth that much to begin with. Their services suck ass anyways.
 
Those Yahoo stockholders are gonna be happy next year when they get taken over at a lower price :D
 
Yahoo is going to be in trouble. There best bet, for their shareholders, would have been an acquisition by MS and the offer was a fair amount. Yahoo's demands of even more money, after MS offered up another $5 billion, shows they are being unrealistic.

Yahoo....a slow, sinking ship.
 
Yahoo shares are going to tumble after this announcement. The only thing keeping them up was the takeover bid. Originally, Yahoo was only trading at around 27 dollars a share. I bet now it drops below $20.
 
$19.18

That's the closing price of Yahoo on Thursday, January 31st, 2008. After trading closed Microsoft made it's plans public. The following day on Friday, February 1st, 2008 Yahoo's stock closed at $28.38.

$29.70

That's the closing price (including after hours trading) of Yahoo on May 2nd, 2008.

I would fully expect Yahoo's stock to tumble on Monday by about 33%, or roughly back to about $19-$20, where it was before all this started.

$32.60

That's the closing price of Microsoft on Thursday, January 31st, 2008. The following day on Friday, February 1st, 2008 Microsoft's stock closed at $30.45.

$29.12

That's the closing price (including after hours trading) of Microsoft on May 2nd, 2008.

I would fully expect Microsoft's stock to climb by about 10%, or roughly back to about $32-$33, where it was before all this started.
 
Like I said in the "Microsoft May Raise Takeover Bid" thread, what's the over/under on the drop YHOO is going to take on Monday morning?

And JethroXP - Microsoft will get back to that low-30s range, I'm just not sure it is going to happen based simply on the news of the Yahoo bid retraction. The information revealed during their Q2 financial conference call is what resulted in their shares to tumble, and it is probably going to keep the stock down in this range for the time being.
 
but yahoo is the #1 visted site on the INTERNET GUYS!

they NEED billions of billions! :sarcasm:
 
evan - The point is that YHOO shareholders, the majority of which are financial institutions at 73%, believe that the longterm value of Yahoo is greater than what Microsoft is offering right now.

Whether or not that is actually the case is up for debate, but Yahoo's positive Q2 results and evidence of continuing growth in the company probably gave more ammunition to that argument.
 
No ability to negotiate means that Microsoft walks away and Yahoo! gets nothing in return. Bad press, bad PR, pissed off share holders. I couldn't foresee MS walking away because I thought they really wanted to get their hands on Yahoo! IP, but I was wrong.
 
Serpico said:
Like I said in the "Microsoft May Raise Takeover Bid" thread, what's the over/under on the drop YHOO is going to take on Monday morning?

And JethroXP - Microsoft will get back to that low-30s range, I'm just not sure it is going to happen based simply on the news of the Yahoo bid retraction. The information revealed during their Q2 financial conference call is what resulted in their shares to tumble, and it is probably going to keep the stock down in this range for the time being.
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Go look at the charts:

http://finance.google.com/finance?client=ob&q=NASDAQ:MSFT

By April 24th, MSFT had gotten back up to $31.80 purely on *rumor* of the deal failing. That was from a low of $26.99 after the deal was announced. The Q2 earnings results only sent the stock down to $28.52. This is very positive news for MSFT investors, and the stock will respond accordingly, mostly because the uncertainty is now gone, and that's what drives stock prices down.

Yahoo on the other hand is riding high on the *expected* value of the deal. With that now gone, expect a precipitous drop in share price, thier Q2 results not withstanding.
 
Oh yeah, YHOO is going to tank hard on Monday.

That said, we'll see as regards to Microsoft's share value. The drop in MSFT's share price was based on their last quarterly report, not the attempted purchase of Yahoo. That said, this news could certainly give them a boost since it removes uncertainty around the company in the short term (and the market hates uncertainty). We'll know soon enough on Monday. All I will say is that if I had to make a bet one way or another, it would be Yahoo taking a huge nosedive on this news.

Now the ball is in Yahoo's court. If can't turn things around it may open them up to another takeover bid, only now at a lower price. The pressure is now on more than ever to prove that the growth they showed earlier this year is actually sustainable and not just a fluke.
 
Also, $28.52 is a long way from $37 in percentage terms. Granted, everything has gotten crushed since the highs of last year, but my point is that it will take more than dropping the YHOO bid to get back to those mid 30s levels again, that's all. That also said, the last few months have been a great time to load up on shares of strong companies that got unfairly beat up in the last few months. I got some friends in AAPL below $130 and GOOG under $470 and I think in the longterm they're gonna do great (hell, they can dump out now and walk away with a great profit). Hopefully you managed to buy some MSFT shares in that period. A good dividend and some of the most solid books out there are a very good thing.

Bonus points to you if you shorted YHOO at the same time. :)
 
Serpico said:
Now the ball is in Yahoo's court. If can't turn things around it may open them up to another takeover bid, only now at a lower price. The pressure is now on more than ever to prove that the growth they showed earlier this year is actually sustainable and not just a fluke.
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Which from my understanding might be the reason Microsoft walked away completely in the hopes that stocks continue to do poorly so that they have no option but to accept a significantly lower offer from Ballmer later on.
 
i thought i saw something stating that they retracted there bid, but might come back with another.... o well eaither way maybe google should offer yahoo a buyout.
 
Yahoo rejected the proposal because Microsoft is not passive in their integration. hundreds at yahoo would find themselves out of a job after the aquasition.

But what made MS foam at the mouth like that? They must have had some strike of brilliance that Yahoo holds a patent to or something. What could it be?
 
MrWizard6600 said:
Yahoo rejected the proposal because Microsoft is not passive in their integration. hundreds at yahoo would find themselves out of a job after the aquasition.

But what made MS foam at the mouth like that? They must have had some strike of brilliance that Yahoo holds a patent to or something. What could it be?
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What could it be? Online ad share. MSFT doesn't give a rats ass about YHOO, their target is GOOG.
 
MrWizard6600 said:
Yahoo rejected the proposal because Microsoft is not passive in their integration. hundreds at yahoo would find themselves out of a job after the aquasition.

But what made MS foam at the mouth like that? They must have had some strike of brilliance that Yahoo holds a patent to or something. What could it be?
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MS "foamed at the mouth" because they saw Yahoo hit a four year low in its stock price, right in the middle of a broad financial crisis where shareholders in general were terrified. It was a great setting for a hostile takeover in the case that the board rejected the offer (which they did). It turns out that it didn't go to plan (shareholders feel that the company is worth more in the long term, plus Yahoo just reported that they did quite well in the last quarter), but at the time it made a lot of sense. These are the exact same circumstances in which EA made a similar bid for Take Two at around the same time.

In the long term this may still work out in Microsoft's favor. If Yahoo cannot show consecutive quarters of growth then their stock will be priced accordingly, and Microsoft will get another shot at a lower priced bid.
 
i cant wait to see yahoo's price on monday, it will be interesting to see where it is at
 
Serpico said:
Oh yeah, YHOO is going to tank hard on Monday.

That said, we'll see as regards to Microsoft's share value. The drop in MSFT's share price was based on their last quarterly report, not the attempted purchase of Yahoo. That said, this news could certainly give them a boost since it removes uncertainty around the company in the short term (and the market hates uncertainty). We'll know soon enough on Monday. All I will say is that if I had to make a bet one way or another, it would be Yahoo taking a huge nosedive on this news.

Now the ball is in Yahoo's court. If can't turn things around it may open them up to another takeover bid, only now at a lower price. The pressure is now on more than ever to prove that the growth they showed earlier this year is actually sustainable and not just a fluke.
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Again, look at the charts. MSFT *did* fall after the deal was announced:

Day before deal announced: MSFT closed at $32.60
Once Week later: MSFT closed at $28.12

That's nearly a 14% drop in a week. That's what will be recovered (or at least some of it) on Monday as the result of this news. The Q2 results came out almost 3 months later. The gains that Yahoo made based on the possibility of this deal will be wiped out come Monday morning, just as the loss in value for Microsoft should mostly be restored. I guarantee that come Monday morning, traders will *not* be thinking about MSFT's Q2 results.
 
Hmm lol maybe microsoft saw this coming before hand? It will significantly lower the price even worse than the 18$ish it was before the bid so microsoft can sweep in and buy them at an even cheaper price eh with less crap from the not so smart CEO of Yahoo.
 
JethroXP said:
Again, look at the charts. MSFT *did* fall after the deal was announced:
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I am fully aware of that; in situations like attempted buyouts the buying stock almost always goes down while the stock being bought goes up to meet the announced bid price. That said, that price action you quoted was also in the middle of a prolonged downturn in the general stock market, one that brought other big techs like AAPL and GOOG down significantly in only six weeks.

Whatever negative impact the Yahoo bid made on Microsoft's stock price had already been amplified by the overall stock market, and in particular the absolute thrashing the NASDAQ has taken. The only other major index that has taken a worse beating has been the Russell 2000.

I also expressly said that the stock price would likely go up based on the elimination of short term uncertainty, something that also boosts a stock price in the short term unless that new certainty is overwhelmingly negative. The point of my posts is that while this will likely give a short term boost to Microsoft's stock price, whether this will rally the stock back to where it was late last year is a completely different question (plus IMO there may be a broad downturn in the market coming shortly, based purely on chart technical analysis and how overbought this recent rally is).

So yeah, Microsoft may do that based solely on this news and stick to the 33-37 range, who knows, but it is something I wouldn't expressly put money on for a short term trade. Like I said, it'll get there, I just don't know if the dropped proposal alone will rally the stock 20%-25%. Maybe I should have been more clear before.

BTW, if you are so certain then you should honestly think about buying a few June or July call options to capitalize on such a big move if most of it hasn't already been taken out by the Monday open.
 
Serpico said:
BTW, if you are so certain then you should honestly think about buying a few June or July call options to capitalize on such a big move if most of it hasn't already been taken out by the Monday open.
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Already done :p
 
I saw this coming, sooner than later MS would get fed up with their delay and lame attempts to make them seem more profitable, and just when Yahoo looked to be taking the deal they had an OK Q2, that just kept their already too inflated heads going in the same direction to pissing off MS enough to just wait for their stock to crash fully.


digitalfreak said:
Ha ha. Microsoft didn't get what they wanted. 'bout time somebody gave them the finger.
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It hasn't been cool to hate on MS since 99, get with the times.
 
JethroXP said:
Already done :p
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Nice, crossing my fingers for you! If those calls open big I'd sell a portion of your position while volatility is through the roof and the price action on the stock is still uncertain in the options market. You might get an even better price than what they settle at, even if the stock goes slightly higher from where you sold it at.

Tomorrow morning should be good fun, best of luck!
 
Trimlock said:
I saw this coming, sooner than later MS would get fed up with their delay and lame attempts to make them seem more profitable, and just when Yahoo looked to be taking the deal they had an OK Q2, that just kept their already too inflated heads going in the same direction to pissing off MS enough to just wait for their stock to crash fully.

It hasn't been cool to hate on MS since 99, get with the times.
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When was it ever cool to hate on yahoo? I don't remember it being cool to hate on ms, either, though the most respected and wizened technology folks I've known generally do. I think you can only really love that company if you're a shareholder... and are able to disregard all the harm they do in every other area, especially to their own customers.
 
As a Microsoft shareholder, I'd like to say one thing.....

...... YAHOOOO !!!! :eek::rolleyes::p

Hey Fatty McBaldfuck.... spend some of that $44 Billion fixes the bugs in your products, dillweed.
 
Yahoo got owned in this letter, imo. If I was a yahoo shareholder I'd be pissed.

Mr. Jerry Yang
CEO and Chief Yahoo
Yahoo! Inc.
701 First Avenue
Sunnyvale, CA 94089


Dear Jerry:

After over three months, we have reached the conclusion of the process regarding a possible combination of Microsoft and Yahoo!.

I first want to convey my personal thanks to you, your management team, and Yahoo!'s Board of Directors for your consideration of our proposal. I appreciate the time and attention all of you have given to this matter, and I especially appreciate the time that you have invested personally. I feel that our discussions this week have been particularly useful, providing me for the first time with real clarity on what is and is not possible.

I am disappointed that Yahoo! has not moved towards accepting our offer. I first called you with our offer on January 31 because I believed that a combination of our two companies would have created real value for our respective shareholders and would have provided consumers, publishers, and advertisers with greater innovation and choice in the marketplace. Our decision to offer a 62 percent premium at that time reflected the strength of these convictions.

In our conversations this week, we conveyed our willingness to raise our offer to $33.00 per share, reflecting again our belief in this collective opportunity. This increase would have added approximately another $5 billion of value to your shareholders, compared to the current value of our initial offer. It also would have reflected a premium of over 70 percent compared to the price at which your stock closed on January 31. Yet it has proven insufficient, as your final position insisted on Microsoft paying yet another $5 billion or more, or at least another $4 per share above our $33.00 offer.

Also, after giving this week's conversations further thought, it is clear to me that it is not sensible for Microsoft to take our offer directly to your shareholders. This approach would necessarily involve a protracted proxy contest and eventually an exchange offer. Our discussions with you have led us to conclude that, in the interim, you would take steps that would make Yahoo! undesirable as an acquisition for Microsoft.

We regard with particular concern your apparent planning to respond to a "hostile" bid by pursuing a new arrangement that would involve or lead to the outsourcing to Google of key paid Internet search terms offered by Yahoo! today. In our view, such an arrangement with the dominant search provider would make an acquisition of Yahoo! undesirable to us for a number of reasons:


-- First, it would fundamentally undermine Yahoo!'s own strategy and
long-term viability by encouraging advertisers to use Google as opposed
to your Panama paid search system. This would also fragment your
search advertising and display advertising strategies and the ecosystem
surrounding them. This would undermine the reliance on your display
advertising business to fuel future growth.

-- Given this, it would impair Yahoo's ability to retain the talented
engineers working on advertising systems that are important to our
interest in a combination of our companies.

-- In addition, it would raise a host of regulatory and legal problems
that no acquirer, including Microsoft, would want to inherit. Among
other things, this would consolidate market share with the
already-dominant paid search provider in a manner that would reduce
competition and choice in the marketplace.

-- This would also effectively enable Google to set the prices for key
search terms on both their and your search platforms and, in the
process, raise prices charged to advertisers on Yahoo. In addition to
whatever resulting legal problems, this seems unwise from a business
perspective unless in fact one simply wishes to use this as a vehicle
to exit the paid search business in favor of Google.

-- It could foreclose any chance of a combination with any other search
provider that is not already relying on Google's search services.


Accordingly, your apparent plan to pursue such an arrangement in the event of a proxy contest or exchange offer leads me to the firm decision not to pursue such a path. Instead, I hereby formally withdraw Microsoft's proposal to acquire Yahoo!.

We will move forward and will continue to innovate and grow our business at Microsoft with the talented team we have in place and potentially through strategic transactions with other business partners.

I still believe even today that our offer remains the only alternative put forward that provides your stockholders full and fair value for their shares. By failing to reach an agreement with us, you and your stockholders have left significant value on the table.


But clearly a deal is not to be.

Thank you again for the time we have spent together discussing this.

Sincerely yours,
/s/ Steven A. Ballmer

Steven A. Ballmer
Chief Executive Officer
Microsoft Corporation
 
Well, YHOO was initially down 20% on the German stock market, now actually up almost 2%. VERY curious to see what happens tomorrow on the NASDAQ now: http://www.ls-d.de/L-S-NASDAQ100-SELECT.98.0.html

Part of me is wondering just how large the drop in price is actually going to be. I now suspect that it won't go down to pre-offer levels if there is still speculation that an offer may still be in the works in the future. Just the possibility of that will keep Yahoo's ask price at a certain level. I've seen it happen before with other takeover targets. Either way, YHOO has become an extremely risky trade, both long and short.
 
Note, this is in the Euro pre-market. Volume is extremely low and bid/ask spreads are much wider in the pre-market, so prices skew weirdly and it doesn't give a great indicator as to how the stock price will move during normal trading hours. I'm gonna check back in an hour and see how it does when everything is active.
 
Down 20% to around $23 in premarket. Lets see if it breaks below $20 in the near future.
 
JethroXP - Looks like I was correct on the short term trade for both MSFT and YHOO. Not only did volatility on the MSFT calls drop, the stock did as well. I hope you dumped at least a portion of those calls around the open like I advised.
 
Jroe52.... what you saw was Microsoft giving Yahoo a hug..... kinda like Tony Soprano giving Pussy Bumpensaro a hug that morning before he took him out on the Stugots and shot him. :eek::rolleyes::p

The Siciliano's call it "the kiss of death". :cool:
 
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