Monday, February 11, 2008

Microsoft Should Call Yahoo's Bluff!

I realize, I'm no M&A expert, but I do try to look at things logically. Since Yahoo has turned down Microsoft's bid, I think before Microsoft makes their next move, they should think through a few things.

  • Microsoft shareholders are not enamored with the proposed deal and the company’s share have taken a hit. If they say "take it or leave it" the share price will rally.
  • No "White Knight" came to rescue Yahoo from "The Evil Empire", so why bid against yourselves.
  • I know this is hard to do for the "Sith Lord" Steve Ballmer, but why would you up your offer for Yahoo? As a stand-alone company they are still the same company as before you made the offer. If you withdraw your offer and say we'll buy it at the price we offered or not at all, what happens to Yahoo's share price. It tanks back to where it resided prior to the offer.
  • Microsoft has already scared away any other bidders because of the size of their bank account, market cap and ability to borrow. If another bid materialized they would certainly have raised their offer. This deal is like an eBay auction. The ASP is low until you get two bidder who want the item.

So, maybe this idea doesn't hold water, but it sure makes sense to me. Microsoft should tell them to take it or leave it and only get back in if another bidder materializes. My guess is, if they called Yahoo's bluff then they would get an earful from shareholders.

Just my 5 cents!

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