Why Microsoft Walked Away from Yahoo
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News Analysis. "Yahoo is a declining asset," said Microsoft CFO Chris Liddell. |
Chris made the statement during Microsoft's annual Financial Analysts Meeting today. Earlier in the day, Microsoft CEO Steve Ballmer said, "We talked about them; it didn't work out. Fine, we're done. We can move on."
Chris and Steve gave contrasting and yet complementary views on the attempted Yahoo acquisition. The perspectives contrasted simply because of viewpoint: CEO's business perspective versus the CFO's financial analysis.
Microsoft announced the unsolicited $44.6 billion Yahoo offer on Feb.1, valued at $31 per share. At the time, Yahoo's shares were selling for around $20.
Chris said that Microsoft made a "highly generous offer" based on "speed. What changed is time past and value eroded." He said that, based on the economics, the deal no longer makes any sense. "There has to be some economic justification."
Steve's Yahoo comments filled out the perspective. "Why not buy Yahoo?" he asked. "There was always going to be huge integration overhead in either buying Yahoo or doing a search deal. And that's always part of the balance in terms of evaluating this option. Frankly, without a big commitment to buy Yahoo, our flexibility in reinventing the search and advertising model, we have more flexibility."
What he's saying: Microsoft could justify the integration if there was expediency. But Yahoo played hard to get.
During the final Q&A, one of the analysts tried to reconcile the time line for collapse, which only seemed like 13 days in May to him.
"The discussions stopped," Steve responded. "We had a discussion with the CEO of the company. We couldn't reach a deal. We moved on." He emphasized: "The deadline passed."
Chris said that when Microsoft made the offer, he would never have expected to be still talking in May. "Something like March would have been great," he said.
"It is a little bit weird," Steve said about a premium offer made in February that didn't become real discussion until May.
During his keynote, Chris said that chances are "essentially negligible" on a full acquisition: "We still have the possibility of doing some search acquisition."
It's funny in a way how Steve dismissed the "declining asset." Apparently, Yahoo is out of the equation, viewed perhaps by Microsoft as Google's whore following their search deal. "Search and advertising is a two-horse race"—meaning Google and Microsoft, Steve said.
Microsoft made 24 acquisitions during fiscal 2008. Yahoo would have been No. 25. The average acquisition size was $45 million.
"We see acquisitions as a fundamental way of driving growth," Chris said.
[Please send your tips or rumors to watchtips at gmail.com].
Comments (6)
""It is a little bit weird," Steve said about a premium offer made in February that didn't become real discussion until May. "
Ahhh. And therein lies the bull$#!@. Nothing in business is "weird". It's either performance or non-performance. Execution or fakery. There is either time or money. Never both.
Old man John Dvorak and others believe Microsoft was desperate for an intellectual property within Yahoo. They trip over absolutes... assuming Yahoo owns a patent Microsoft must have to perform on the internet.
With all the strange new things Microsoft has been able to announce (but, notice they aren't DOING the things now? always the future.) they certainly seem able to say they are going to join the next generation version of the web.
Remember how Yahoo suddenly announced they were going to rewire from the inside out to build Yahoo into the Semantic Web?
That's what Microsoft was looking for. I wonder if they found it... or they're just saying they found it.
Business never has both time and money. Business always has to execute. To execute, you have to have a plan not driven by desperation (desperation demands and presumes you have both time and money which can not be).
If things are "weird" it's because you are desperate and find you really don't have both time and money.
And so you say bull$#!@ to throw people off the trail to explaining the "weird"ness.
Posted by portuno | July 24, 2008 10:02 PM
See here where Balmer says that the only way to win is to buy everyone out of the space and have no competition. That Microsoft cant compete is the one fact they themselves recognise and now they are saying so as well.
Posted by verne | July 24, 2008 10:25 PM
"Yahoo is a declining asset," said Microsoft CFO Chris Liddell."
This does sound like "sour grapes" to me. But then Yahoo has been declining, but so has about everything Microsoft has been throwing money at online, MSN and Live. And it does not look like the organic plan of Microsoft is working. So about the only question is now, since the Yahoo deal is almost really over, is will Microsoft make a deal to buy or merge with AOL? Or is Microsoft using the AOL deal to further try and soften Yahoo into reducing its price? One commentator here suggested that in the end, Microsoft would have to pay the price that Yang asked for Yahoo, its possible. Even with AOL and Yahoo, Microsoft will not being able to compete long term online against Google.
Posted by The Hand | July 26, 2008 2:20 PM
Hate MSFT if that's your thing but give them credit for protecting shareholders from stupidity.
I don't care if you love AAPL or Linux, this doesn't change the fact that YHOO is complete crap and will eventually disappear.
Posted by BlahBlah | July 26, 2008 11:54 PM
@BlahBlah
You are totally right. Ms products do rule, and i am sorry that i was trying to talk them down. I find lately I can't think striaght trying to get all of this Linux crap to work.
Accept my apologies. I am loading Vista on my Mom's PC now, and ensuring that she has the best OS on the market today!
Posted by The Hand | July 27, 2008 6:32 PM
@BlahBlah
Don't give into these MS Shills, they're losers and now I know its all those guys that I made mention earlier.
Yes, I know that Microsoft is a better product and I skipped my medication now and then, but still, don't give into the pressures of a better operating system.
Also remember, if you are like me, the only way you're going to get laid is if, and I mean IF the woman dies and wills it to you. Long live Ubuntu, long live Linux and Linus T is a god!
Posted by Marco | July 27, 2008 10:08 PM