It's off. Microsoft withdraws its offer for Yahoo -- for now

Posted May 3rd 2008 8:40PM by Peter Cohan
Filed under: Microsoft (MSFT), Yahoo! (YHOO)

CNET News reports that Microsoft Corp. (NASDAQ: MSFT) has officially withdrawn its offer to acquire Yahoo! (NASDAQ: YHOO). Reportedly the two sides could not agree on price -- Microsoft was willing to go up to $33 a share but Yahoo! wanted $37 -- $5 billion more than Microsoft was prepared to spend.

Steve Ballmer also decided against a proxy fight for Yahoo! shareholder support -- suggesting that it would be a time consuming and costly process that would give Yahoo! more time to make itself a less desirable acquisition for Microsoft.

Is this really the end of it? I expect Yahoo!'s stock to tumble and Microsoft's to rise. Yahoo! stock was trading up to $29.70 in the after hours market as of 8pm last night. But I expect the stock to plummet to where it was before Microsoft made its offer -- $19 a share.

This should wipe out about $11 billion of Yahoo!'s market value. Perhaps Microsoft can load up on a control position in the open market more cheaply than the $33 a share it was offering before and return to the table at a lower price.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in the securities mentioned.

Tags: Ballmer, inthenews, Microsoft, Yahoo

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Reader Comments (Page 1 of 1)

5-04-2008 @ 1:49AM

G. Hufford said...

Microsoft made the right decision. Yahoo was greedy and stupid (unless they simply did not like Microsoft)....

5-04-2008 @ 4:04AM

Paolo said...

Well, I'm a small YHOO investor and I'm really happy there won't be an acquisition at this stage. "I expect the stock to plummet to where it was before Microsoft made its offer -- $19 a share."... who really cares? Not me, given YHOO is worth at least $ 40/45... BTW, for me a merger with AOL would make much more sense...

5-04-2008 @ 9:51AM

Dan Barnett said...

Paolo,

Isn't the question of what Yahoo is "worth" the whole issue? You think the stock is "worth" $40/45. Last Friday, the "market" settled on a price of $29.70. Mr. Cohan feels that the consensus price will be around $19. Another post mentions $22.

If you truly believe that the stock is worth $40 then you should be buying aggressively. (see Sheldon Liber's posts on doubling down on HNP) On the other hand Mr. Cohan's comments reflect his opinions & he comes to a different conclusion. As they say, "That is why God made horse races".