Yahoo Board To Reject Microsoft Offer | Hacker News Reader

Yahoo Board To Reject Microsoft Offer

online.wsj.com

58 pointskirubakaran44 comments

From the reason they quoted ("the $31 per share offer massively undervalues Yahoo!"), my guess is that this 'rejection' is just the first play in a dance over the price, which I'm sure Microsoft was prepared for, even if it bid high initially in an attempt to appear the White Knight.

If Yahoo!'s board really did not want to sell, it would have cited lack of benefits to the merger, culture differences, or technology platform differences, which are all real concerns.

Their risk is that if they ask too much, then Microsoft will slink away, which will probably crush their share price for a while. Hopefully some people had options that they could excercise under the recent 40% jump in Yahoo!'s shares, although considering it's decline in the last year, even that seems unlikely.

Husband of a friend works in management over at Yahoo. She says the word is around the water cooler, that Yahoo's looking for around $36 a share, and then will sell.

Sounds like morale is pretty low, and sound like there's going to be a lot of engineers looking for new jobs soon. Or, a lot more startups rising for Yahoo's ashes.

If I were him, I would have been hoping they'd accept the first offer. There's a pretty good chance now that MS isn't going to go any higher (especially given what's happened to their stock since the bid became public news) and his shares are going to spiral into the abyss.

You're famous: http://valleywag.com/355173/yahoo-to-sell-at-36

"Massively Undervalues" huh...

Let's see, a stock price of under $20/share previous to the $31/share offer being made. A greater than 50% premium is massively undervaluing the company?

Granted the market is not a perfect indicator of true value of a company. Google was a good example of this when they were valued at around $100/share and then proceeded to quadruple in value over the next 2 years.

However, Yahoo is no Google. They have not been able to effectively compete. I'm surprised Microsoft was willing to offer such a premium for Yahoo in the first place. Maybe I underestimate the synergies of the two companies and/or Microsoft's concern about their online division.

The interesting question to me is what comes next...Does Microsoft: A. Sweeten the offer B. Walk away completely C. Give it a year expecting Yahoo's price to drop significantly before making a subsequent offer?

Unless the Yahoo boardmembers have some plan up their sleeves, I expect some very unhappy shareholders should B or C pan out.

Robert X Cringely had some interesting theories. Mostly it was about MS wanting to turn itself into a "General Electric" over time, rather then compete head on with google.

"Massively undervalues" is a way of Yahoo saying "We think our share price should be higher than A: what it is, and B: what you're offering."

Yahoo is undoubtedly going through a rough time in terms of their share price, but what's being forgotten is past performance. Since the beginning of 2007 Yahoo's share price has averaged around $25 or so, with a low of $22.73 and a high of $33.63. The pre-bid low this year was $19.05, and was probably due to the fact that the majority of the industry was taking a beating, along with the rest of the economy.

When companies offer takeovers, they usually pay a premium in share price, however Microsoft took advantage of the state of the economy by offering a takeover at a particularly low point in share price, allowing them to offer an artificial premium that was - when compared to YHOO average share price - at only a $5 premium, or 20%.

Average share price over the last year is meaningless. Yes, the economy in general was taking a beating, but Yahoo had also come out with disappointing earning and outlook. At any given time, the market does a pretty good job at pricing in all factors to a stock's price.

If the economy as a whole is having problems and a company is at risk of lower earnings, the stock is clearly worth less. Over the longer term, if a company is able to get over those hurdles and achieve the earnings they desire, their value will again rise.

Would you argue that if a company tried to buy Citibank at $40/share that they were trying to take advantage of things? Its current price is $26/share but it was above $45 for the majority of the year. Citi, similar to Yahoo has had significant difficulties that reflect on the potential future earnings of the company. Therefore, these companies are likely fairly valued.

As a result, the Yahoo line that they are "massively undervalued" rings false to me. They have turned down a tremendous premium over their value...Unless they have other courses of action to raise their earnings significantly or they have other offers. My best guess is they are just negotiating and trying to get Microsoft to offer a few more $/share.

It's just the business cycle. The economy at whole is having problems and the company is at risk of lower earnings, as you said. This is temporary. The economy will recover, and Yahoo is probably expecting their stock to rise again to closer to their average. Yahoo is probably telling Microsoft that the premium they are offering does not reflect their true value, but an artificially low value instead. Come back later when our stock rebounds with the rest of the economy.

I'm saying that Yahoo is currently down right now, and understandably so, but that it is set to rise with the rest of the economy and Yahoo wants Microsoft to reflect that in their offer.

I believe that there is validity in the claim "massively undervalued" though the term "massively" is subject to different interpretations.

maybe the market was accurately valuing Google, though? of all the startups out there, how many deliver on a Google scale?

That is true, not many companies can deliver on a Google scale, and there was a good amount of risk that Google wouldn't have been able to deliver.

Maybe the risks that Google would not have been able to deliver on the scale that they have warrants a return of 400% over two years. However, I tend to believe that the market didn't perfectly understand Google's technology/market placing/placing/potential/strength of executive team/etc and low-balled the upside potential.

Visual proof that this would be a poor move for microsoft, at least according to investors. http://finance.google.com/finance?chdnp=1&chdd=1&chd...

Doesn't this almost always happen with mergers and acquisitions?

MS stock took a hit because part of the deal involved a 7% dilution in MS shares. That type of hit was expected.

If $29 per share massively undervalues Yahoo, wouldn't Yahoo have spent the last two years buying back huge amounts of its own stock?

Requires cash :(

Perhaps a private equity firm would have stepped in if this was really the case. And if Yahoo knows something its shareholders don't (as to why it is massively undervalued) it better speak up soon.

"the $31 per share offer "massively undervalues" Yahoo,"

Now I'm no mathematician, but when microsoft made that offer, I believe their stock closed at 19.10, which I believe is significantly less than $31. The mere offer from microsoft caused their value to jump 50% in a day. Monday might be ugly for YHOO owners.

This is normal in a a takeover situation.

The reason being that a company that you control is worth a lot more than a bunch of shares that pay you dividend, but offer you little or no control over the company.

The pundits know this and drive up the price, expecting to make a profit when Microsoft buys them out.

Shares offer proportional votes.

Many people believe that Yahoo is massively undervalued on Wall Street.

I feel like the value of a company is mostly defined by Wall Street, at least for a company the size of Yahoo. Obviously there are companies that provide important services that aren't even public, however, when determining a company's overall value or growth, stock price is a pretty good indicator.

Well even though this is a normal takeover situation. The price Yahoo is going to be asking will most likely be above 60 Billion. I think that might be too much gable for MS. I am sure Microsoft made the offer with levy for a much higher demanding offer. The question is how much levy.

Heh, Google's stocks are moving http://finance.google.com/finance?q=NASDAQ:GOOG

I hope this definitively kills Micro$oft.

I very highly doubt that.

Yeah thats not exactly possible. I do wonder, however, what this effectively does to Yahoo's stock price.

see for yourself

http://finance.google.com/finance?q=yahoo

What this stock price says to me is that investors are betting that this story, even if it's correct, is not the last word, and that Microsoft (or someone) will eventually get them.

Is it possible though, that the stock prices went up as a sign of investor relief? I'm not sure all stockholders were too happy with the deal.

If Yahoo! does reject the offer, their stock price should, were the market completely rational, fall a lot. Back to what it was before Microsoft made the offer in the first place.

Yahoo's the same company it was two weeks ago; the stock was just worth more since MS was offering a premium.

The other possibility is that investors are not completely rational.

Yahoo is the same company it was in November; the stock is just worth what it was then. It's the last 3 months that's been the aberration. ;-)

doubts can be dangerous :)

Just imagine all those Yahoo services ported to Silverlight. I think it would be very impressive actually.

It's kind of scary to think that corporations existing today are likely to be around for hundreds of years. All hail our corporate overlords.

I wouldn't count on it. Look how many of 1908's giants are still big today. A few, but most are dead and gone. This book talks about some of the reasons why:

http://www.squeezedbooks.com/book/show/2/why-most-things-fai...

OK. I doubt that Microsoft and Yahoo will be around in 2108. It seems inconceivable that Google could fall though, especially if Google.org's energy research pays off.

Here's the paper:

http://links.jstor.org/sici?sici=0002-8282(199805)88%3A2%3C62%3ASASMAT%3E2.0.CO%3B2-8

Unfortunately it's not free. The stats cited in the book are that only 20% of the top 100 from 1915 were still there in 1995. Think about the technology landscape 100 years ago, and how much it's changed. I think there's every chance that Google will either not be around, or be radically smaller or different than it is now. It could be even larger, too. It's simply not possible to know. What is evident though, is that with time, companies grow and die.

Bonus fact - this is one of the oldest companies in the world:

http://en.wikipedia.org/wiki/Zildjian

Why, by 2108 there will be superhuman machines and all... If Google is not the company who invents them, they will be toast.

There are some pretty good comments about the deal over at slashdot.

http://slashdot.org/article.pl?sid=08/02/09/1812239

Yahoo stock is trading around $29 a share, yet Yahoo's board say that Microsoft's offer of $31 a share "massively undervalues" the company?

Sure, that is quite plausible. The current market capitalization / stock price of a company is not the final word on a company's value. Whether it is true or not is another question, but it is certainly possible that Yahoo is undervalued by the MSFT offer.

That's YHOO's price after the offer was made, before that the price was below $20.

Value is in the eye of the shareholder ;)

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