The New York Times reports that Friday night Microsoft Corp. (NASDAQ: MSFT) and Carl Icahn made an offer for Yahoo! (NASDAQ: YHOO). The offer was for Microsoft to buy Yahoo's search business and for Icahn to buy the rest of Yahoo!
Icahn and Microsoft gave Yahoo! 24 hours to decide. But Yahoo! took "four or five hours" to reject the offer. The Times quotes Yahoo! chairman, Roy Bostock who said: "It is ludicrous to think that our board could accept such a proposal. While this type of erratic and unpredictable behavior is consistent with what we have come to expect from Microsoft, we will not be bludgeoned into a transaction that is not in the best interests of our stockholders."
I am not sure what the terms of this latest offer were. But it seems foolish of Microsoft and Icahn to make an offer and give Yahoo! only 24 hours on a weekend to decide. I wonder whether they're simply trying to annoy Yahoo! and expect that their tactics will encourage its board to resign in frustration so Icahn won't need to spend more money trying to throw them out.
Meanwhile Yahoo! has declared it will consider a sale of the company at $33 a share -- the price Microsoft offered a few months ago but more recently considers too high. Yahoo! also said it would sell its search business -- but at a higher price than Microsoft offered.
Microsoft is not serious about buying Yahoo!'s search business. It has so much cash that it could easily afford to pay what Yahoo! is asking. I think Microsoft is wasting time with this game that it could -- if it had the technical ability -- be using to build a better search business.
Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter
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