Sonic Money Predicted it - Microsoft Walks from Yahoo

Microsoft withdraws offer for Yahoo

Microsoft Corp (MSFT.O) walked away from its bid to buy Yahoo Inc (YHOO.O) on Saturday after the Internet company turned down its offer to raise the price by $5 billion to $47.5 billion.

Microsoft's offer was for $33 a share but Yahoo would not lower its demand below $37, Microsoft Chief Executive Steve Ballmer said. The software company initially bid $31 per share for Yahoo more than three months ago.

"We believe the economics demanded by Yahoo do not make sense for us, and it is in the best interests of Microsoft stockholders, employees and other stakeholders to withdraw our proposal," Ballmer said in a statement.

Analysts say Yahoo has overplayed its hand and they expect the Web pioneer's shares to fall as much as 30 percent to $20 levels when Nasdaq trading resumes on Monday. The stock rose nearly 7 percent to $28.67 on Friday on hopes of an agreement between Microsoft and Yahoo.

"Wow. I'm shocked Yahoo wasn't more reasonable. The stock will probably go down at least $5 on Monday. It is surprising that Ballmer walked away instead of trying a hostile bid at $33," said Walter Price, a senior portfolio manager at RCM fund management company in San Francisco, which had 21 million Microsoft shares and 2 million Yahoo shares as of the end of December.

Laura Martin, a senior analyst at Soleil Securities, said she expected a number of shareholder lawsuits against Yahoo.

"The Yahoo guys want too much money for their company. We think $33 a share is fair in the context of the weakening economic environment and adverse advertising trends," she said. "They've prioritized employees over shareholders in the hopes that someday they can create more than $8 billion of value, even if they have no track record of doing so," she said.

Some Wall Street analysts also have said Microsoft could pull its bid as a negotiating strategy aimed at putting pressure on Yahoo to eventually accept a future offer.

GOOGLE DEAL NEXT WEEK?

Yahoo Chairman Roy Bostock said in a statement the company believed from the beginning that Microsoft's offer undervalued it, and the board was "pleased that so many of our shareholders joined us in expressing that view."

He said Yahoo was pursuing "strategic opportunities" but gave no details.

Yahoo has courted possible deals with Time Warner Inc's (TWX.N) AOL Internet division or News Corp's (NWSa.N) MySpace online social network, and tested a search advertising partnership with Google Inc (GOOG.O). A partnership with Google may be announced as early as next week, a person with knowledge of discussions told Reuters.

"With the distraction of Microsoft's unsolicited proposal now behind us, we will be able to focus all of our energies on executing the most important transition in our history so that we can maximize our potential to the benefit of our shareholders, employees, partners and users," Yahoo co-founder and Chief Executive Jerry Yang said in a statement.

Jordan Rohan, founder of digital media advisory firm Clearmeadow Partners, said Yahoo could name Time Warner as a partner or buy AOL to put a positive spin on the situation, but neither option would give as good a payoff to shareholders.

"Yahoo management and board overplayed its hand. Shareholders were cheated out of a victory," Rohan said. "I think Yahoo forgot what it felt like to have a share price under $20. They may be reminded soon."

Ballmer cited Yahoo's Google plans as one reason Microsoft was walking away rather than mounting a hostile offer.

"We regard with particular concern your apparent planning to respond to a 'hostile' bid by pursuing a new arrangement that would involve or lead to the outsourcing to Google of key paid Internet search terms offered by Yahoo today," Ballmer said in a letter to Yang, made public on Saturday. "In our view, such an arrangement with the dominant search provider would make an acquisition of Yahoo undesirable to us."

REALLY WALKING?

Microsoft wants to buy Yahoo to gain a stronger foothold in its battle with Google, which is expanding rapidly into the software maker's own turf with new Web-based applications.

Technology analysts say Microsoft may not really walk away from Yahoo, and Saturday's move could parallel Oracle Corp's (ORCL.O) strategy in winning over BEA Systems Inc (BEAS.O). Oracle pulled its offer in October 2007, leading BEA shares to fall 6 percent. Despite the tough talk, the companies reached an agreement in January this year.

Although Microsoft has not succeeded in sealing a deal, tough talk by Ballmer has already brought Yahoo to the negotiating table.

According to a person familiar with Microsoft's thinking, Yahoo's advisers said initially it would not negotiate with Microsoft for anything less than $40 a share. But amid threats by Microsoft to launch a hostile takeover, Yang suggested a price of $38 a share, the person said.

On Saturday, Yang and Yahoo co-founder David Filo met Ballmer and Microsoft's Platforms & Services Division President Kevin Johnson in Seattle, where they communicated that Yahoo's board was willing to cut a deal at $37 a share, although the two co-founders remained committed to a dollar more per share, the source said.

Price was not the only stumbling block, another person familiar with the discussions said. Microsoft had also failed to respond adequately to antitrust regulatory concerns that Yahoo raised at several meetings, said the source who was not authorized to speak on the record.

Yahoo also wanted "value-certainty" assurances the value of Microsoft's offer would remain the same when the deal, if it did get done, closed, the person said.

(Additional reporting by Michele Gershberg, Kenneth Li and Tiffany Wu in New York, Muralikumar Anantharaman in Boston and Peter Henderson in Los Angeles; Editing by Peter Cooney)

Excerpt From Chris Liddell - CFO of Microsoft - Why this merger won't happen

If your wondering why the merger between Microsoft and Yahoo won't happen all you have to do is look at this quote :

CHRIS LIDDELL: Well, no one asked me about Yahoo, which is interesting. But I'm sure everyone is vaguely interested in it. You know, their —

MARY MEEKER: What was that? What was that?

CHRIS LIDDELL: Yeah. The small company that we're looking to acquire.

Can anyone say Corporate Culture Clash !!!

Staring Death In The Face

I am long on Micosoft and Short on Yahoo. Today Balmer will be making an announcement that could greatly affect my portfolio. I am staring death in the face.

Maybe they will announce they are web enabling Microsoft Windows suite...

Looks Like Bad News For Yahoo - Short it while you can

Yahoo!: MSFT could have trouble winning a proxy fight against YHOO's board - WSJ (29.01 )

WSJ reports one major Yahoo shareholder said he "would have a hard time" selling shares at $31. The investor believes the co is worth significantly more and suspects a proxy battle would be hard for MSFT to win with an offer below Yahoo's 52-week-high intraday price of $34.08. With the threat of a proxy battle, "what Microsoft is really trying to do is get Yahoo to the table" to negotiate a sale, this person said... The co hasn't attracted any rival bids. YHOO continues to hold discussions with NWS.A about folding MySpace.com and other Web properties into Yahoo in return for a roughly 20% stake, according to people familiar with the matter. While a deal still is unlikely, NWS.A remains serious about the talks, which are giving it an inside look at Yahoo's business. News Corp. President Peter Chernin has met with at least one Yahoo director recently, and News Corp. officials last night flew out to Yahoo's offices for discussions, according to people familiar with the matter. Yahoo also is discussing a possible partnership with T, according to people familiar with the matter. The co isn't in a rush to seal a deal with anyone, adds another person familiar with Yahoo's position, as it has begun fielding other inquiries from around the tech and media spheres.

Stock Holders are getting edgy. This is a bet for the ages. May want to Short Google Also.

Read this post I found on the main investment board for Yahoo:

As a holder in YAHOO i am asking you now to send a message to the board.
#1 Tell Mr. Yang and the rest of the board to open the door now to all suitors!
#2 Tell them we want a higher price offer for our shares and other investments north of 40 dollars a share.
#3 Say no to selling off or sharing search engine and add with GOOGLE
[MY COMMENTS WILL FOLLOW}
#4 Send a message to Microsoft that we will under no means take scare tactics or bulling us into a 31 dollar offer. Send a counter offer now!
#5 Ask for a statement from Jack Ma CEO of ALLIBBA for imput on offer of 31 dollar tender off by Microsoft and state we feel that Yahoo's shares should be offered as of last years price of 48 dollars a shares but we would like his imput.
Comments: There was a piece released by someone on Bloomberg this morning stating that Yahoo investors rather give into Microsoft's bid then fight with Google.
Let me state something here now: If you or any other investor think that Googles help in anyway will help Yahoo survive you are quite mistaken.
As to Microsoft we should demand that Mr. Balmer, Mr. Gates that we expect talks to be held in a civil manner and that we will not be bullied or be the subects of scare tactics!
At this time Yahoo needs a merger with another to gain market share and our share to price value! We demand right now that the board invites all bidders to the table and that all offers will be looked at in a timely manner and knowing that GOOGLE if they offered a price that it would have swift anti trust problems. We all know this would not pass. You should also read between the lines that Google isnt a white knight here but is only out for themselves. With a Microsoft and Yahoo merger you are looking at a power house which ran right out of the gate, will and can be a world wide power house of the internet. The share offer of 31 dollars a share is just not acceptable. Give Microsoft a counter offer now and make it public and open to all other suitors that we are looking for a share price between 46 to 50 dollars a share.
ALL INVESTORS MUST STAND THEIR GROUND NOW AND VOICE THEIR OPINIONS AND INTENT TO YAHOO'S BOARD AND ALL SUITORS NOW! THIS MESSAGE BOARD IS A GOOD START. AS OF RIGHT NOW SPEAK UP AND SHARE YOUR THOUFHTS AND DEMANDS TO THE BOARD THAT THEY WORK FOR THE INVESTORS AND OWNERS OF THE BOARD AND NOT THEMSELVES. WHERE DID BLOOMBERG GET THIS INFORMATION FROM THAT YAHOO INVESTORS WOULD RATHER TAKE A 31 DOLLAR OFFER THEN FIGHT WITH GOOGLE? THE MEDIA AND CERTAIN ANALYST ARE STATING THAT YAHOO IS FINISHED AND GONE! ALSO THAT MICROSOFT IS DONE AND GONE WITHOUT THIS DEAL. YES IT WOULD MAKE THE BIGGEST THREAT AND MOST LIKELY MAKE THE BIGGEST INTERNET POWER HOUSE OF SEARCH AND ADD COMPANY IN THE WORLD AND BE WELCOME COMPETITION BUT THESE 2 COMPANIES ARE NOT TOAST IF IT DONT. TELL THE BOARD THAT WE DEMAND THAT THEY LOOK AT ALL OPTIONS AND SUITORS THAT WILL INCREASE YAHOO'S MAXIUM VALUE NOW NOT LATER AND ALSO ASK FOR MR. JACK MA'S IMPUT FROM ALLIBBA WHICH YAHOO OWNS 40% OF THAT COMPANY AND IS A VERY BIG ASSET FOR YAHOO IN THE FUTURE. ALSO ASK FOR IMPUT STATEMENTS FROM YAHOO JAPAN AND OTHER PARTNERSHIPS OF MAJOR VALUE FOR THEIRS. WE MUST SPEAK UP AND MAKE SURE THIS BOARD LISTENS TO US NOW SO WE RECEIVE MAXIUM VALUE. DONT LET ANYONE FOOL YOU! OR SCARE YOU INTO SELLING AT THIS MOMENT.JUST BY THE TACTICS ALONE WE KNOW YAHOO'S SHARE PRICE IS WORTH MUCH HIGHER.
WE SHOULD ALSO ASK THE SEC TO WATCH YAHOO'S SHARE PRICE FOR MANIPULATION AS THESE TALKS GO FORWARD.
IT IS THE DUTY OF THE BOARD TO FIGHT FOR MAXIUM VALUE AND TO LOOK OUT FOR SHAREHOLDER AND INVESTORS INTEREST NOT THEIR OWN EGO DEMANDS. BEGIN NOW BY SPEAKING UP TO THIS MESSAGE AND DEMAND TO THE BOARD THAT THEY OPEN FORMAL TALKS WITH ALL SUITORS AS OF RIGHT NOW! TELL MICROSOFT THAT THE BID PRICE IS MUCH TOO LOW AND HAVE YAHOO AT THIS TIME OFFER A COUNTER OFFER IN THE HIGH 40'S. THANK YOU FOR YOUR TIME