
Yahoo Board To Reject Microsoft Offer - kirubakaran
http://online.wsj.com/article/SB120257515426256541.html
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Xichekolas
From the reason they quoted ("the $31 per share offer massively undervalues
Yahoo!"), my guess is that this 'rejection' is just the first play in a dance
over the price, which I'm sure Microsoft was prepared for, even if it bid high
initially in an attempt to appear the White Knight.

If Yahoo!'s board really did not want to sell, it would have cited lack of
benefits to the merger, culture differences, or technology platform
differences, which are all real concerns.

Their risk is that if they ask too much, then Microsoft will slink away, which
will probably crush their share price for a while. Hopefully some people had
options that they could excercise under the recent 40% jump in Yahoo!'s
shares, although considering it's decline in the last year, even that seems
unlikely.

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iamelgringo
Husband of a friend works in management over at Yahoo. She says the word is
around the water cooler, that Yahoo's looking for around $36 a share, and then
will sell.

Sounds like morale is pretty low, and sound like there's going to be a lot of
engineers looking for new jobs soon. Or, a lot more startups rising for
Yahoo's ashes.

~~~
mattmaroon
If I were him, I would have been hoping they'd accept the first offer. There's
a pretty good chance now that MS isn't going to go any higher (especially
given what's happened to their stock since the bid became public news) and his
shares are going to spiral into the abyss.

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mixmax
There are some pretty good comments about the deal over at slashdot.

<http://slashdot.org/article.pl?sid=08/02/09/1812239>

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bp001
"Massively Undervalues" huh...

Let's see, a stock price of under $20/share previous to the $31/share offer
being made. A greater than 50% premium is massively undervaluing the company?

Granted the market is not a perfect indicator of true value of a company.
Google was a good example of this when they were valued at around $100/share
and then proceeded to quadruple in value over the next 2 years.

However, Yahoo is no Google. They have not been able to effectively compete.
I'm surprised Microsoft was willing to offer such a premium for Yahoo in the
first place. Maybe I underestimate the synergies of the two companies and/or
Microsoft's concern about their online division.

The interesting question to me is what comes next...Does Microsoft: A. Sweeten
the offer B. Walk away completely C. Give it a year expecting Yahoo's price to
drop significantly before making a subsequent offer?

Unless the Yahoo boardmembers have some plan up their sleeves, I expect some
very unhappy shareholders should B or C pan out.

~~~
dkokelley
"Massively undervalues" is a way of Yahoo saying "We think our share price
should be higher than A: what it is, and B: what you're offering."

Yahoo is undoubtedly going through a rough time in terms of their share price,
but what's being forgotten is past performance. Since the beginning of 2007
Yahoo's share price has averaged around $25 or so, with a low of $22.73 and a
high of $33.63. The pre-bid low this year was $19.05, and was probably due to
the fact that the majority of the industry was taking a beating, along with
the rest of the economy.

When companies offer takeovers, they usually pay a premium in share price,
however Microsoft took advantage of the state of the economy by offering a
takeover at a particularly low point in share price, allowing them to offer an
artificial premium that was - when compared to YHOO average share price - at
only a $5 premium, or 20%.

~~~
bp001
Average share price over the last year is meaningless. Yes, the economy in
general was taking a beating, but Yahoo had also come out with disappointing
earning and outlook. At any given time, the market does a pretty good job at
pricing in all factors to a stock's price.

If the economy as a whole is having problems and a company is at risk of lower
earnings, the stock is clearly worth less. Over the longer term, if a company
is able to get over those hurdles and achieve the earnings they desire, their
value will again rise.

Would you argue that if a company tried to buy Citibank at $40/share that they
were trying to take advantage of things? Its current price is $26/share but it
was above $45 for the majority of the year. Citi, similar to Yahoo has had
significant difficulties that reflect on the potential future earnings of the
company. Therefore, these companies are likely fairly valued.

As a result, the Yahoo line that they are "massively undervalued" rings false
to me. They have turned down a tremendous premium over their value...Unless
they have other courses of action to raise their earnings significantly or
they have other offers. My best guess is they are just negotiating and trying
to get Microsoft to offer a few more $/share.

~~~
dkokelley
It's just the business cycle. The economy at whole is having problems and the
company is at risk of lower earnings, as you said. This is temporary. The
economy will recover, and Yahoo is probably expecting their stock to rise
again to closer to their average. Yahoo is probably telling Microsoft that the
premium they are offering does not reflect their true value, but an
artificially low value instead. Come back later when our stock rebounds with
the rest of the economy.

I'm saying that Yahoo is currently down right now, and understandably so, but
that it is set to rise with the rest of the economy and Yahoo wants Microsoft
to reflect that in their offer.

I believe that there is validity in the claim "massively undervalued" though
the term "massively" is subject to different interpretations.

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amohr
Visual proof that this would be a poor move for microsoft, at least according
to investors.
[http://finance.google.com/finance?chdnp=1&chdd=1&chd...](http://finance.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chfdeh=0&chdet=1202593904000&chddm=98141&cmpto=NASDAQ:MSFT&q=NASDAQ:YHOO)

~~~
fortes
MS stock took a hit because part of the deal involved a 7% dilution in MS
shares. That type of hit was expected.

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__
If $29 per share massively undervalues Yahoo, wouldn't Yahoo have spent the
last two years buying back huge amounts of its own stock?

~~~
aston
Requires cash :(

~~~
cstejerean
Perhaps a private equity firm would have stepped in if this was really the
case. And if Yahoo knows something its shareholders don't (as to why it is
massively undervalued) it better speak up soon.

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amohr
"the $31 per share offer "massively undervalues" Yahoo,"

Now I'm no mathematician, but when microsoft made that offer, I believe their
stock closed at 19.10, which I _believe_ is significantly less than $31. The
mere offer from microsoft caused their value to jump 50% in a day. Monday
might be ugly for YHOO owners.

~~~
mixmax
This is normal in a a takeover situation.

The reason being that a company that you control is worth a lot more than a
bunch of shares that pay you dividend, but offer you little or no control over
the company.

The pundits know this and drive up the price, expecting to make a profit when
Microsoft buys them out.

~~~
anewaccountname
Shares offer proportional votes.

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lyime
Well even though this is a normal takeover situation. The price Yahoo is going
to be asking will most likely be above 60 Billion. I think that might be too
much gable for MS. I am sure Microsoft made the offer with levy for a much
higher demanding offer. The question is how much levy.

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ivan
Heh, Google's stocks are moving
<http://finance.google.com/finance?q=NASDAQ:GOOG>

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ivan
I hope this definitively kills Micro$oft.

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dawnerd
I very highly doubt that.

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kajecounterhack
Yeah thats not exactly possible. I do wonder, however, what this effectively
does to Yahoo's stock price.

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mixmax
see for yourself

<http://finance.google.com/finance?q=yahoo>

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pg
What this stock price says to me is that investors are betting that this
story, even if it's correct, is not the last word, and that Microsoft (or
someone) will eventually get them.

~~~
kajecounterhack
Is it possible though, that the stock prices went up as a sign of investor
relief? I'm not sure all stockholders were too happy with the deal.

~~~
aston
If Yahoo! does reject the offer, their stock price should, were the market
completely rational, _fall_ a lot. Back to what it was before Microsoft made
the offer in the first place.

Yahoo's the same company it was two weeks ago; the stock was just worth more
since MS was offering a premium.

~~~
nostrademons
The other possibility is that investors are not completely rational.

Yahoo is the same company it was in November; the stock is just worth what it
was then. It's the last 3 months that's been the aberration. ;-)

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corentin
Yahoo stock is trading around $29 a share, yet Yahoo's board say that
Microsoft's offer of $31 a share "massively undervalues" the company?

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neilc
Sure, that is quite plausible. The current market capitalization / stock price
of a company is not the final word on a company's value. Whether it is _true_
or not is another question, but it is certainly possible that Yahoo is
undervalued by the MSFT offer.

~~~
anewaccountname
That's YHOO's price after the offer was made, before that the price was below
$20.

