Where's the Yahoo Shareholder Revolt?
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News Analysis. Yahoo isn't taking the stock price beating so many pundits predicted. Now why is that? |
Recap, for the one or two people who missed the news: Late Saturday, Microsoft withdrew its unsolicited bid for Yahoo.
As I'm writing, the stock is on the way back up, after falling about 16 percent in early trading. As I post, Yahoo's share price is $24.83; the stock closed at $28.67 on Friday. The stock was around $19 when Microsoft made its unsolicited $31-per-share bid about three months ago.
Granted, $24.83 is a long way from the $33 a share Microsoft was ready to offer, but the price has steadily risen over the last couple hours. There had been speculation the stock would free fall to end-of-January levels, but that hasn't happened yet. Google is on the move, opening at $599 a share, after closing at $581.29 a share on Friday. Google's share price has since retreated, to $589.84, as I post.
By comparison, Microsoft shareholders didn't much react to Saturday's news. Shares opened at $29.95, just 71 cents off Friday's close. As I post, Microsoft's stock is $29.49 a share.
The stock market's reaction to the failed Microsoft-Yahoo merger is reason to reinterpret events. What if Yahoo CEO Jerry Yang effectively sold the promise of the company's future to major shareholders? Yahoo's silence made little sense given the amount of pressure Microsoft applied the last four weeks. But Yahoo could play hard to get and keep silent if the board knew that major shareholders would support an independent company.
There, Google may have been a major influencer. Rumors about a formal Google-Yahoo ad/search deal flourished last week.
In his withdrawal letter to Jerry, Microsoft CEO Steve Ballmer wrote:
"After giving this week's conversations further thought, it is clear to me that it is not sensible for Microsoft to take our offer directly to your shareholders. This approach would necessarily involve a protracted proxy contest and eventually an exchange offer. Our discussions with you have led us to conclude that, in the interim, you would take steps that would make Yahoo! undesirable as an acquisition for Microsoft."
Now why wouldn't it be sensible for Microsoft to go to shareholders? Microsoft was quite committed to the acquisition, so why not try harder—go for the proxy fight? It makes sense not to fight if Microsoft had already spoken to major shareholders and they weren't supportive of a proxy fight. Such an interpretation makes sense of Yahoo's holding out for more money.
But contrary to blogs and news stories pinning the deal's collapse on share price, Google is the reason. When I first read the letter, I took the "steps" to mean that Yahoo would seek to poison the deal. But that poisoning, what Steve referred to as making "Yahoo undesirable as an acquisition for Microsoft," is a formal ad/search deal with Google. Poison to Microsoft would be perfume to many Yahoo shareholders.
Maybe a shareholder revolt is yet to come. But I'm no longer convinced. The events make a more sensible story when interpreted from a different perspective—that shareholders won't be as angry as many Microsoft and Yahoo observers predicted.
That said, I still see Steve's letter, and Microsoft executive comments over the last 10 days, as seeking to stir up Yahoo shareholder anger and resentment.
Comments (13)
Microsoft often plays "Devil's Advocate".
But I don't believe that the devil really exists in this case.
I agree, Yahoo denial of Microsoft raises my confidence in the Web-Company. Now if they can get a search-share deal with Google, then we can have 2 "Devil's Advocates".
Since we chose "the devil we know" in the last election (Bush over Kerry), I think our country much prefers "the devil we don't know" now (Google over Microsoft).
Posted by ZzarkLinux | May 5, 2008 1:32 PM
"What if Yahoo CEO Jerry Yang effectively sold the promise of the company's future to major shareholders?"
Yahoo has been quite a bit more confident in the past few months than they had been all of 2007.
Ballmer walked away meek and mild as opposed to the roaring hostile takeover lion that had been portrayed.
Looks to me that Yahoo showed Microsoft what they had to justify asking for billions more. Looks to me that Microsoft excused itself because it knew it wouldn't get to join in the fun Yahoo has planned for the future.
Those who think this whole game picks back up where Microsoft and Yahoo first started this discussion are going to have to get used to the fact the next generation internet paradigm can build, scale and impact much more quickly than the traditional products and tools.
I would say Yang has sold the shareholders and it would take a much more physical, tangible promise than just "we'll work harder".
Microsoft is the outfit that will have to work harder now... and even that may not be enough to stave off massive structural failure in the corporate body once the truth about Microsoft's technology gap gets out.
Posted by portuno | May 5, 2008 4:13 PM
Now you've got it.
Either way, YHOO would win: either GOOG gives it money or MSFT gives it money.
MSFT appears to have won for losing, in the short term. (In a year, it may be another story.)
Posted by Ken Houghton | May 5, 2008 4:29 PM
i sold my shares today. a day late, but still. yhoo demonstrated in the last 3 months that they have horrible strategic thinkers at the top.
Posted by Sam | May 6, 2008 12:38 AM
Looks like Yshareholders are happy that Yahoo! stood up to that thug Ballmer and his bullying. They probably realized that Micro$oft would destroy Yahoo! with its despicable business practices. No wonder they are happy.
Now the real shareholder revolt should be in Micro$oft: shareholders should toss Ballmer out on his rearend.
Posted by Maddog | May 6, 2008 3:55 AM
Baldmer can afford to wait out Yahoo. if Yang can't turn it around, MSFT could still get Yahoo but at a much lower price originally offered.
none of this has any bearing on portuno/i-man's penny stock pump & dump scam.
Posted by Al | May 6, 2008 7:05 AM
Yesterday will certainly be remembered for some time. Even after its huge drop, Yahoo still recovered a point. Microsoft quickly gained a point and then lost it. A nice global picture is shown here:
Is Microsoft Aura Fading?
Investors Fear Yahoo Bid
Exposed Key Weaknesses
In Software Business Model
online.wsj.com/article
/SB121004447596669953.html?mod=googlenews_wsj
"Yesterday's early relief rally reversed, and Microsoft's value has now fallen by more than $30 billion since it unveiled its bid for Yahoo on February 1."
"Even after yesterday's 15% slide, Yahoo is worth $7 billion more than it was before Microsoft publicized its offer."
"But perhaps most importantly, there is a fear among shareholders that the Yahoo bid exposed weaknesses in Microsoft's business model."
Like I said yesterday, the biggest looser seems to be Microsoft. Yahoo lost a value which was set high due to speculation, but overall gained since Feb 1. Microsoft not only lost value since Feb 1. It can now be seen as having no strong presence in the ad market, little relevance in the web service market too and a lot of the same old vaporware coming from Redmond. On top of that its actions promoted a joint venture between Yahoo and Google opening the doors for a possibly bigger alliance down the road. A very vulnerable moment for Microsoft indeed.
Posted by Gerardo Tasistro | May 6, 2008 7:22 AM
Yea... Microsoft lost that is why it looks like Yahoo is crawling back today and "maybe open to talks" on MS terms.
Yahoo screwed this up badly.
Posted by Max | May 6, 2008 11:56 AM
@Max, I don't see Yahoo crawling back up today. The high value it had on Friday was pure speculation. The price drop we saw yesterday did not take Yahoo below its price prior to the Microsoft buy announcement. Today Yahoo has gone up about 1.5 points since yesterday's closing.
Posted by Gerardo Tasistro | May 6, 2008 12:38 PM
Gerardo Yahoo stock went up today because YAHOO is sending signals the deal is still doable... if it becomes clear the deal is dead Yahoo stock will retreat.
From Yahoo's Chairman Roy Bostock:
"In the final analysis the independent directors of the board had to make a determination of what our position would be when we put the first price on the table," [Bostock said]... "We said, considering all of these hard data, what we should do is say we think a fair value for the company is $37. It was not a take-it-or-leave it statement."
If the people running Yahoo think they can get in bed with Goggle and survive they out of their minds because contrary to popular belief here Goggle not MS is the real evil empire.
Posted by Max | May 6, 2008 1:50 PM
Possible scenarios and my view of the outcome:
Yahoo goes it alone:
Yahoo either barely floats or slowly sinks.
Yahoo hooks up with Google somehow:
Yahoo's best will succeed at Google and personally advance regardless of Yahoo the company.
Yahoo is bought by Microsoft and Microsoft leaves their technology alone:
Microsoft shows the world that BSD Unix is a viable and compelling alternative to Windows Server. The Yahoo division either barely floats or slowly sinks because of its continuing status quo. Many of the Yahoo division's best will succeed at Google and personally advance regardless of Yahoo the Microsoft division.
Yahoo is bought by Microsoft and Microsoft converts their technology to Windows Server and .NET:
Microsoft will bury itself in a financial disaster so big that it will either bail with major egg on its face or collapse trying. The Yahoo division languishes and Yahoo's best will jump to Google and succeed personally.
What could Ballmer be thinking by buying Yahoo? He might as well buy iffy-performing airplane wings for his house. At best, it would be worthless. At worst, it would be a financial disaster.
Posted by Philosopher | May 6, 2008 5:38 PM
@Max, well it's been about two hours since Microsoft officially announced the withdraw of the purchase. Yahoo's stock hasn't moved and is still above pre February values. What has gone down is Microsoft's stock after said announcement and then some more again after some Facebook chit chat.
These facts kinda disprove your point don't they?
Posted by Gerardo Tasistro | May 7, 2008 3:26 PM
@Max, a day later and YHOO keeps going up and MSFT keeps going down. Is there some secret deal going on? Hehehe...
Posted by Gerardo Tasistro | May 8, 2008 12:28 PM