After Microsoft Corp. (NASDAQ: MSFT) announced it was withdrawing its offer for Yahoo! (NASDAQ: YHOO) I thought that Yahoo stock would end today at $19 -- which is where it traded before the deal was announced. But Yahoo is currently trading over $24.
Here are three reasons that Yahoo may be trading $5 above where it was pre-Microsoft:
- Google Inc. (NASDAQ: GOOG) deal. Investors are ascribing some value to the possibility that Google will sell some of Yahoo's search advertising;
- Short covering. Investors who bet on the deal falling apart may be covering their short positions in Yahoo -- keeping a floor beneath its stock price;
- Still in play. Microsoft may buy up a control position in Yahoo at the current market price and return to negotiate a Yahoo takeover at a lower price.
One thing seems likely to me -- investors are not piling into the stock because they believe that Yahoo has some money making strategy up its sleeve that will accelerate its earnings growth. But I hope for Yahoo shareholder's sake that I'm wrong.
Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter











Reader Comments (Page 1 of 1)
5-05-2008 @ 4:25PM
NewsVisual said...
In the immediate aftermath of the retreat of Microsoft Corp in its several-months-long effort to acquire Yahoo! Inc, the Sunnyvale-based company’s stock lost 15 percent of its value, which raised speculation in the business-news media that dissident shareholders will mount an offensive to oust the company’s current Board of Directors as a punishment for not accepting a deal with Microsoft. In a company statement issued on Saturday, it was obvious that Yahoo Chairman Roy Bostock remained unrepentant with regard to the position that the company’s Directors staked out in response to Microsoft’s bid. From the beginning of this process, our independent board and our management have been steadfast in our belief that Microsoft's offer undervalued the company and we are pleased that so many of our shareholders joined us in expressing that view,” Mr. Bostock said in the company’s statement. “Yahoo! is profitable, growing, and executing well on its strategic plan to capture the large opportunities in the relatively young online advertising market,” he added. Yet the company’s shareholders could remain skeptical over whether its Directors acted in their best interest. Indeed, many of the shareholders may even be irate over what many could see as the company passing up a good offer from Microsoft, especially after the Redmond company increased its bid during the later stages of negotiations. This dissatisfaction could cause many of Yahoo’s shareholders to attempt the ouster of its Directors.
5-06-2008 @ 12:34AM
Greg said...
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5-06-2008 @ 7:24AM
Benjamin Taylor said...
Could this be much ado about nothing? I mean is the combined company really going to be able to compete with Google any better than each has on its own? Google's market share for Web search in the U.S. rose in February to 58.7 percent, up from January and the same period a year ago, while Yahoo's, at 17.6 percent, was down compared with the same periods. Microsoft's MSN was 11.2 percent. Together, Yahoo and Microsoft only have half of Google's share in the space.
http://brickfinancial.com/blog-mt1/mt-tb.fcgi/46
http://www.brickfinancial.com/thethirdpig/archive/2008/05/yahoo_playing_hard_to_get.html
Google's present position as the market leader has only gotten more solidified over the years. Just over two years ago (August '05), Google only had a share of 37%, while Yahoo and Microsoft together had 45% of the market. Google is in a prime position no matter the outcome of the Yahoo/Microsoft merger. When "Google" ceases in being a verb, then its time to worry.