It is sad to see that Yahoo is not even putting up a fight. There was no competing bid so no reason for Microsoft’s offer to put more money on the table. Usually we can expect another 10-20% premium. So far we have seen any signs of a white knight. I thinkYahoo will try to get the offer closer to $40. Not sure they will be succesfull. At the end of the day, the price may end up at $36-$37 I think.
While they can go to Google and partner (outsource) with them on search advertising and boost cash flow. A move like this will trigger the regulatory people to question and delay this deal. Such a search-advertising agreement would likely encounter serious objections from an anti-competition perspective. For 07, Google had a 71% share of U.S. search-adv revenue, and Yahoo was second with 8.9%, according to eMarketer. For U.S. online adv overall, Google garnered 28% of revenue, and Yahoo was second with a 15.4% share in 07; Time Warner's AOL had 6.6%, and Microsoft's MSN had 6.5%. In December, Google handled 56.3% of U.S. search queries, while Yahoo handled 17.7% and Microsoft handled 13.8% according to the Nielsen Online. If Yahoo's board makes the wrong move, it may be getting a flurry of shareholder lawsuits for a breach of fiduciary duty. So tread carefully.
It is not a secret but less talk about that Yahoo’s display inventory is estimated between 12X to 15X of Google’s. They bought some interesting companies buying RightMedia, MyBlogLog, Flickr etc. over the years but unfortunately hey just don’t how to monetize them. Or Yahoo could increase its cash flow by an estimated 10-25, swallow their pride and let Google runs its search advertising business. And that kind of a deal could give them a good reason to keep Microsoft out. Outsourcing search to Google is not bad move (aol) from a strategy perspective, but it is a huge blow to Yahoo’s pride, They might as well do that and acknowledge that all those money and time invested into Yahoo’s Panama project to revamp their search advertising platform simply failed. I think Yahoo’s fate cannot be changed. Here’s email Jerry sent to his folks at Yahoo on the Microsoft offer (source: documents filed to the SEC on Monday, Feb. 4)
-CONFIDENTIAL-
fellow yahoos:
since we talked to you this morning, there's been a lot of media coverage and industry chatter about microsoft's unsolicited proposal to acquire yahoo!. we know you've been hearing and reading a lot about this. that's why we wanted to reach out to all of you at the end of the day to emphasize a few things that we hope will give you some more context about this proposal, the process that our board is taking, and what you can expect in the days ahead.
first, we want to emphasize that absolutely no decisions have been made — and, despite what some people have tried to suggest, there's certainly no integration process underway. this proposal is just that — a proposal. and it was only made in the last 24 hours. you can be sure the board is going to review it thoughtfully and carefully, and do what's right for our great company. microsoft's proposal is one of many options that we're evaluating in order to maximize value for our shareholders and employees over the long-term. that's why we will respond to microsoft after our board has completed a careful review of all of our strategic alternatives.
second, we can't let any of the noise we're hearing around this situation distract us from our core mission. it's critical that we continue to focus on running our business, executing our strategy and delivering value to all of our users, advertisers and publishers.
finally, we realize that this may have been a tough day for many of you, especially those on the front lines of our business. we know you have many questions, and we're committed to making sure you're as informed as possible as this process moves forward. in the interim, we both want to thank you for your continued energy, focus and determination. we'll continue to share information with you as we have it and can do so.
jerry and roy bostock (our new non-executive chairman)
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