Yahoo! (NASDAQ:YHOO) and Microsoft (NASDAQ:MSFT) met recently to discuss Redmond's buyout proposal. It did not go well. According to The Wall Street Journal :"The Microsoft executives showed no willingness to raise their cash-and-stock offer."
It is old news that a long wait on a resolution does not help Yahoo!. Its management and board are distracted by the M&A issue when they should be working on fixing a company which is experiencing slow growth and margin pressure. Microsoft may also suffer because Yahoo! may be having modest revenue problems and key employees may be leaving in the face of the buyout.
While it has been proposed before, it is stunning that Microsoft does not walk away from its offer, at least for now. At this point Redmond has absolutely no leverage. The Yahoo! board can wait it out.
By lowering its offer, Microsoft could send Yahoo!'s stock back to $19 where it traded two weeks before the offer. Investors in Yahoo! would scream for a deal. The stock trades at $28 now.
It is odd that Microsoft, known for its aggressiveness, is frozen at the wheel. While dropping the price is not a new idea. it looks better every day.
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
4-04-2008 @ 9:36AM
Stan said...
YHOO better get its act together. MSFT will not be wait forever. If MSFT either drops the price or backs out of the offer YHOO will see its stock price plummet back to 19 or lower. As we get deeper into a resession and if MSFT backs away from the deal YHOO could see its stock price fall to 15 or lower.The YHOO board is being foolish at best and not handling its responsiblities to share holders at worst. For this writer I bought YHOO at slightly higher than 20 and now have taken my profit and moved on.