Apple and Microsoft are growing earnings at slower than historical rates, and are getting pounded by the other giants- Google, Facebook, and Samsung. To improve their market positions, they need to do something big, and YHOO looks like a logical extension to Apple and Microsoft's core businesses. YHOO can be acquired cheaply at around $31 (Same level MSFT originally offered) exactly 5 years ago. Apple or MSFT could sell off the approximately $15/share value of Alibaba and Yahoo Japan and keep the media and mobile pieces of YHOO that are the growth pieces. Seems like a no brainer that YHOO will eventually be acquired by one of these cash rich companies.
Microsoft Proposes Acquisition of Yahoo! for $31 per Share
Feb. 01, 2008
Transaction valued at approximately $44.6 billion in cash and stock; provides 62 percent premium to current trading price for Yahoo! shareholders; combined entity to create a more competitive company, providing superior value to shareholders, better choice and innovation for customers and partners
Microsoft’s consistent belief has been that the combination of Microsoft and Yahoo! clearly represents the best way to deliver maximum value to our respective shareholders, as well as create a more efficient and competitive company that would provide greater value and service to our customers. In late 2006 and early 2007, we jointly explored a broad range of ways in which our two companies might work together. These discussions were based on a vision that the online businesses of Microsoft and Yahoo! should be aligned in some way to create a more effective competitor in the online marketplace. We discussed a number of alternatives ranging from commercial partnerships to a merger proposal, which you rejected. While a commercial partnership may have made sense at one time, Microsoft believes that the only alternative now is the combination of Microsoft and Yahoo! that we are proposing.
In February 2007, I received a letter from your Chairman indicating the view of the Yahoo! Board that “now is not the right time from the perspective of our shareholders to enter into discussions regarding an acquisition transaction.” According to that letter, the principal reason for this view was the Yahoo! Board’s confidence in the “potential upside” if management successfully executed on a reformulated strategy based on certain operational initiatives, such as Project Panama, and a significant organizational realignment. A year has gone by, and the competitive situation has not improved.