In the days after Microsoft's bid for Yahoo (NASDAQ: YHOO), it seemed clear that the deal would have cleared at $35 a share: Microsoft (NASDAQ: MSFT) offered $31, Yahoo soft-countered (through the press) at $40. Press reports suggested that Yahoo was holding out for $35 or so, and, initially, it seemed that's where a deal would get done.
But intead of sitting down with Microsoft, Yahoo decided to play the waiting game, moving heaven and earth to find some alternative--any alternative--to selling out to Redmond. It also reportedly insisted that Microsoft raise its bid before the companies began to negotiate seriously. (We and others believed the bid increase would come at the 11th hour, after the companies began negotiating, as a way to make sure the deal was friendly and Yahoo could save face).
Now, two months later, the market has deteriorated, Microsoft has gotten tired of being patient, and even Yahoo shareholders who stumped publicly for a Microsoft bid increase seem to have significantly lowered their expectations (see Legg Mason's Bill Miller's announcement in the Journal this morning that he would be excited about a mere $1 increase in the bid).
So is it too early to speculate that Yahoo's bad M&A strategy has already cost shareholders at least $3 a share, or about $4 billion? No. The precise loss, if any, will only be clear after the deal concludes (or disintegrates), but it seems to us that, so far, anyway, the passage time is hurting Yahoo more than it is Microsoft (though neither company is benefitting).
A strong first quarter from Yahoo will rescue the company's board and validate the waiting-game strategy. In the meantime, however, it seems that--far from serving Yahoo's shareholders--the company's board is merely costing them money.