Microsoft-Yahoo Showdown – Bill Gates’ first salvo

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Feb 21 2008
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Stop haggling over the price like some housewives at wet-markets, says Bill Gates. It’s a logical statement to make when you’re talking about coughing extra billions if the bid price of $31 a share were to be raised. But the richest man on earth did not say the first bid price was final and not a take-it-or-leave-it offer. All he said was the offer price was very fair. While Yahoo Inc.’s (Nasdaq: YHOO, stock) supporters are running amok that they could see the last of Yahoo very soon, Bill Gates could be right about the offer price being fair. Yahoo is dying slowly but surely unless a genius miraculously could multiply its bottom-line instantly.

Gates also said Microsoft Corp. (Nasdaq: MSFT, stock) will invest more into search and competing against Google Inc. (Nasdaq: GOOG, stock) – with or without Yahoo. The billionaire also hinted that he was actually after the pool of great engineers – the backbone of Yahoo’s business of which the engineering work could leapfrog Microsoft faster than its current pace. Strangely if Microsoft could do that why didn’t the giant do it earlier? To be number three in terms of market share goes to show Microsoft wasn’t serious in the search business in the first place, no?

Microsoft Yahoo ShowdownWhatever the strategies Microsoft is definitely playing “hard to get” and trying to paint a picture that it is not so desperate in having Yahoo on its dinner plate after all. It appears Microsoft Corp. is taking the hostile-route instead when sources that it will authorize a proxy fight at Yahoo this week. The move to pressure Yahoo board, which will cost Microsoft Corp $20 million – $30 million is definitely cheaper than giving away billions in extra should Microsoft chose to raise the bid.

It’s like a game of who blinks first at this stage, the same way option traders try to get the best “Ask” or “Bid” prices trading options. Analysts say Microsoft is using the proxy fight to circumvent a poison pill (and not to actually start a proxy war), a strategy used by companies to prevent unwanted takeovers by flooding the market with additional shares to dilute the holdings of hostile acquirers.

There’re at least two facts that point to a Microsoft-Yahoo merger ultimately. Firstly Yahoo shareholders seem to welcome and like the idea of Microsoft buying over Yahoo. Secondly there are reports that Yahoo is secretly giving away generous severance packages for employees to protect them in the event of layoffs. The ending of this merger episode is quite obvious – the writing on the wall says Microsoft will up its bid and Yahoo will gladly takes it.

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MSFT is never known for innovative ideas (usually one step slower than competitors) and I can not think of anything ohter than the monopoly of Windows when talking about MSFT. So, it is not a stock to own. Besides, its share price is supported by its cash. Without the cash, its share is going south.

I see this as a good deal for YHOO shareholders because it will take a long time for YHOO to be competitive again.

i never like MSFT stock either …

considering this yahoo-microsoft as a done deal, which company do you think will get sleepless nights? short that co’s stock …

cheers …

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