Friday, February 01, 2008

In a Hostile Takeover Is Yahoo's White Knight eBay?

I was just reading Henry Blodget's most recent post entitled, Yahoo Refused Polite Offer on Tuesday--So Microsoft Went Hostile, in regards to the Microsoft offer to acquire Yahoo and it looks now that this proposed deal may be considered a hostile offer rather than a nice little request from those in Redmond.

According to the post: "Kara Swisher reports that Microsoft made a standard polite offer for Yahoo earlier this week, after Yahoo's depressing earnings report, and that Jerry Yang once again told Microsoft to take a hike. So Microsoft did--right to the court of public opinion."

Blodget went on to write; "Sources at Yahoo tell me that Microsoft made its most recent overtures right after Yahoo announced its earnings Tuesday and then told Yahoo execs they had two days to respond or Microsoft would go public with the offer."

So, this got me thinking. I've been an advocate of an eBay/Yahoo merger for many months and many people have told me that eBay doesn't need Yahoo, so the idea is a non-starter -- I've always felt Yahoo needed eBay more. Well as of today announcement, if Yahoo doesn't want to become part of Microsoft and have everybody move to Redmond, then they better start looking for a White Knight. Could that be eBay?

The corporate cultures are very similar. The two companies are already partners in numerous venures. Skype would fit in perfectly with Yahoo and the idea of eBay not needing Yahoo may have changed. eBay has to think; Will Microhoo be the best partner for us? What if MicroHoo decides to expand their ecommerce business instead of selling off the pieces? What would eBay do?

I'm just saying, this might be the opportune time for eBay and Yahoo to get together. This is very interesting and I'm going to enjoy the dance.

Already and Update: Blodget is now reporting that a Private equity firm was days away from an offer for Yahoo so maybe this isn't a done deal. eBay could join forces with the private equity firm or merge with Yahoo directly. This just keeps getting more interesting.

BTW, not to toot my own horn but on Tuesday of this week I suggested that it might not be long for Yahoo going it alone.

More Thoughts! John Donahoe needs to get on the phone to Jerry Yang today and make an offer in an effort to position eBay. If eBay takes the price up, then they can negotiate with Microsoft to back off in exchange for a deal for the ecommerce assets. This would be a high stakes game of Chicken but eBay strategically needs to be part of this discussion in some way either for leverage or for protection.

Even More Thoughts! The following quote is why John Donahoe or Meg Whitman needs to be making the call. It is from an email from Steve Ballmer to Microsoft employees: "By combining the strengths of our companies, we can deliver an efficient and highly competitive offering for our customers. Our complementary assets will give us increased talent and scale to compete in the markets of search and online advertising, and pioneer new innovations in the areas of video, mobile services, online commerce, and social media." Bold is mine

If Microsoft wants to compete in online commerce, eBay should be very concerned. But nobody listens to me so, who knows if they will have an independant thought about this.

Thoughts just keep coming! - I guess I'm not the only one to think that eBay might come to the rescue of Yahoo by merging with them and foiling Microsoft. Barrons in a recent post said: "The rise in eBay today seems largely to reflect the fact that they would be one of the few remaining decent sized Internet companies left to buy if the Yahoo deal closes. (Unless someone is imagining that they will be combine forces with Yahoo as a way to fend off the MSFT bid.)"

The market believes this Microsoft/Yahoo deal is good for eBay (share price is up 7&), I don't. I believe that Yahoo Shopping, Yahoo Stores and stakes in Alibaba and Yahoo Japan should not be owned by the guys in Redmond. Let's see if John Donahoe has the chops to pull something off.

Just my 5 cents!


Tony P. said...

If you think that Kevin is following ya, you must think I'm a true stalker! LOL Nope, I just have a few opinions and I like how you think. We could have a great beer or two!

Anyhoo, here's a way of looking at this Microhoo venture.. in my twisted fashion. Suppose it's all a plot by MS to weaken ebay?

If MS makes enough gestures towards the Y, ebay will respond with a ridiculously-high offer. Think Skype.

Just imagine if MS bought Yahoo and didn't sell One Damn Thing to ebay. Think what avenues they would have into the ebay framework, what with those sponsored ads. Ebay would have to go with Google, exclusively!

I'm kinda getting goosebumps just thinking that if this is true, then ebay is chitting bricks, about now.

Why would they be so desperate to keep Yahoo independant, if they (ebay) can't have 'em? Because they have been on a path to buy them, for the past two years.

Yahoo started to do Relevant search results (WTH? they did un-relevant previously?) about a year ago, with their Panama project. That put them on a footing with Google (not really, but we're talking perception here).

Ebay makes a deal with Yahoo to do the sponsored ads, that gives Yahoo a growing base of customers and puts them in lock-step with ebay's future desires - to control the searching on the site.

I don't know who has been telling you that an Ebayhoo isn't THE perfect wet dream for ebay, but it ain't me bro! Under such a synergy (a real one!), even Skype would excel.

As an aside... MS has built Multi-$100M facilities all over the USA/world for the past few years. Speculation, and the official MS word (no pun) is that they are for online applications. I don't buy that.

Randy Smythe said...

Tony, maybe I should add a catch phrase to my blog. Drinks and conversation, because you are exactly right we would enjoy have a beer and shooting the breeze.

As for MicroeBayHoo, I've got my "tin hat" at the ready just in case. :)

I've read just about every commentary on the M & Y deal and only seen 1 post, other than mine on the real effect on eBay. So I am either a nut or the only one who gets it. (probably a little of both) Thanks for supporting my nuttiness.

Microhoo is nowhere near as good of an eBay partner as Yahoo by itself. Microsoft enjoys annihilating the competition. Yahoo was a true partner. If Microhoo keeps the auction assets they will maximize them by going after eBay aggressively.

A Microhoo deal will be bad for investors in eBay (though they dodn't get that because they took the share price up 7% after the announcement)but it will be good for online sellers. Yahoo Shopping, Yahoo Stores, and the Asian Auction assets will benefit the online sellers and force eBay into more changes to maintain their business. Forget about growth!

If eBay doesn't make their own move for Yahoo now either as a merger or with the help of Private Equity they will have allowed Microsoft to become a real player in ecommerce.

Tony P. said...

If eBay doesn't make their own move for Yahoo now either as a merger or with the help of Private Equity they will have allowed Microsoft to become a real player in ecommerce.

And therein, my beer-guzzling-buddy, brings us back to: just HOW MUCH would ebay pay for Yahoo, if push came to shove?

Imagine those same Harrr-varrd MBA minds that simply reasoned that Skype was a synergy-buy. Imagine them Scrambling in sheer terror to acquire capital (as we speak/write)for what they see as an absolute necessity!

Honestly, what amount could you see ebay offering? Factor-in that MS will do a Raise, several times, before ebay makes their final bid. Now imagine The Street seeing that figure. Reading those analysts' postings would be something, wouldn't it?

I'd bet you that the word "Skype" would appear no less than 10 times in each posting, or the beer's on me!

Randy Smythe said...

eBay doesn't have the Market Cap that Microsoft has.

Microsoft has a Market Cap of $283.40B eBay is under $40 billion and Yahoo is about the same as eBay so eBay really can't outbid Microsoft. Microsoft also has $19 billion in cash to eBay's $5 billion.

The only way eBay could out-bid Microsoft is if they could join forces with a Private Equity firm and that isn't likely so the only option left is eBay and Yahoo merging to keep from being gobbled up by Microsoft.

The board might not want to sell but the investors are going to want to get paid.

It is a long-shot that eBay and Yahoo would do this but I think they have to try.