Re: [MLUG - DISCUSSION] News Alert: Microsoft Says It Is Withdrawing Bid for Yahoo (fwd)

["Jonathan King" <EMAIL:PROTECTED>]

On Sun, May 4, 2008 at 7:53 PM, Vern Green <EMAIL:PROTECTED> wrote:
> I have no idea its worth either, however judging by the way their stock has
> dropped after Microsoft walked away, I would say that $33 per share was a
> fair price.

History teaches us that companies generally over-pay for most of their
acquisitions. The proper role of a Board of Directors for the company
that may be acquired is to keep this fact in mind and therefore try to
get the very best price possible. There are, of course, cases where
low-ball offers are made, although this doesn't look like one of them.
At the end of the day, the question that Yahoo board members should
have asked themselves is whether $33 per share is or is not likely to
be more than the net present value of all cash that will flow to Yahoo
stockholders. My guess is that it was indeed more than Yahoo's
stockholders will ever see, so turning this offer down was not wise.

> Now Yahoo is scrambling to try and find other ways to increase their sotck
> value, partnering with Google, merging with Time Warner. With that kind of
> desperation, I would have to guess that Yahoo is in trouble. This article
> says that with no dealings at all, Yahoo is a $25 per share company.
>
> http://www.reuters.com/article/mergersNews/idUSN0433970320080504?pageNumber=2&virtualBrandChannel=0

I doubt that Yahoo is worth even $25 per share. Yahoo is in no
immediate "trouble", but that's not what should be the point. What
should be the point is that the board should work to maximize
shareholder value. I don't think they really did that here.

The important outcome here is that Microsoft didn't over-pay for
something they really didn't need. That's probably good for them, but
I'm not really sure what their long-term prospects are really like.
These days MS is an OS monopoly with fraying margins, an applications
monopoly with fraying margins, a big player in the video game console
market (but that's not a very high margin business), the purveyor of
some big-time enterprise software (e.g., Exchange), and a few bits and
pieces here and there (including a big wad of cash). It was very
unclear to me what MS would gain from buying Yahoo.

jking

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