O.K. - So I think that we all agree that come Monday morning, Yahoo shares will probably sell off pretty dramatically. Many here expect the price of Microsoft to go up as a result of the terminated negotiations. While this in fact may be the scenario that plays out on a short-term basis, I am not so sure that in the long run Microsoft proves to be the biggest loser in the deal.
Just the mere fact that Microsoft would consider the Yahoo deal, or any other deal for that matter, sends a resounding message to the investment community that they have possibly maximized their ability to earn revenues from their existing business model and felt that the only way that they could grow revenues and profits in the future was to essentially "buy them" through an acquisition. Thinking that Yahoo provided them with the best alternative, they launched their efforts to acquire the company. Now that the deal has apparently fallen through, Microsoft is still in a position of having to find new ways to increase corporate revenues and profits or the share price of Microsoft will not escalate any higher. But now that the Microsoft/Yahoo deal is "off the table", what happens if someone like Google comes in a acquires Yahoo. Wouldn't this forever eliminate the possibility of Microsoft doing a deal "at any price"? And since they would be locked out of doing any deal, wouldn't the investment community conclude that Microsoft shares will probably not be going up anytime in the near future and as a result start dumping their Microsoft shares onto the marketplace in mass quantities thereby causing the price of the stock to decline dramatically?
These are just a few of my thoughts and I would appreciate your responses. For disclosure purposes, I currently have no position in Microsoft or Yahoo (either short or long, call options or puts). Good luck to all traders.
Current multiple is at 14X earnings...MSFT historically commands 18-19X. We're going higher...we're only down to 14X due to the expectation of issuing more shares to cover the YHOO deal. Without the deal, the historical multiple returns. Going from 14X to 18X is a 25% premium from Friday's close.
I agree, I say:
MSFT will trade at 35 on the open. 36 intraday, and close just above 34. Look at other deals dropped at the last hour. GE attempted acquisition of HON back in 01. after the EU blocked it, GE was up 25% and HON was down 30% (EU is Yang in this case, talk about self defeating). Ouuucccccch, that one stung a bit!
There are many other examples like this in the last decade....
And yes I am long the 31 may calls. GOD BLESS AMERICA!!!
I agree MSFT will be up Monday and Yahoo will be down. But the biggest loser in the deal was not MSFT it was Yahoo shareholders. To have one person turn down and offer and leave $50B on the table and not I would like to see what the shareholder have to say is mine boggling to me. MSFT is not like Yahoo how runs their entire business around the internet. The internet is just a portion for MSFT, with Xbox, gaming software, O/S for servers and desk tops, CRM, Office and on and on. With the other deals they have made will move MSN to a better produce in a few years. It was going to take a few years before this deal was going to be approved any way. Then another 6 months to a year to get Yahoo intergraded into MSFT. I look for MSFT to move into the no 2 spot in the time MSN to improve the product. With what the employees at Yahoo lost alone with the $50B will be coming to MSN. So the biggest loser in the deal were the employees and the stockholder of Yahoo.
Sorry man but those thoughts are way off. I agree Microsoft made themselves seem desperate for yahoo, but look at their EPS trends by analyst estimate and they are all still trending upward, and the stock still has a relatively low PE ratio. These are both huge buy signals for a fundamental trader. Second, if google did want to buy yahoo, it would take them at least two years if at all, for monopoly reasons, I dont think it would ever be approved. The threat that yahoo put out in regards to an ad contract with google was a weak attempt to get microsoft to raise its bid. This contract basically makes yahoo a new client of google. Who wants to be a client of their largest competitor. Microsoft has enough cash flow to do whatever they need, lets be honest they could go buy google.
I agree with all you just said, except the last statement that MSFT could buy GOOG. GOOG is huge, with a market cap of almost $200 billion. MSFT isn't much bigger than that. MSFT could not finance GOOG at even the market cap, let alone with the huge premium that would be required.
MSFT just saved 42.3 billion bucks. This stock will rock on Monday, especially since most people bet the wrong way. The analysts were dead wrong on the deal going through. Everybody thought MSFT was going to cave and bid much higher for YHOO. But the disaster has be averted. A big short squeeze will happen now.
What you think that since yahoo has been around...12 years that MSFT hasn't grown! ON their own!
Your comments are not right.
MSFT IN FACT has GREAT guidance next year and that was WITHOUT pathetic yahoo.
What does yahoo have going for them? ZERO absolutely NOTHING!
In fact it's going down the toilet without a clear reversable plan. Google is eating their lunch and doesn't have an answer.
MSFT continues EVERY QTR to beat numbers.
Yahoo was just gonna provide another avenue for ANOTHER business segment....not change the entire company's focus.
Yahoo will long be dead and MSFT will keep chugging along.
Yangs share wealth just got whacked IN HALF. Why does he give a crap! It's still worth BILLIONS....so far, but come 6 months from now it could be halved again as Google continues to grow at the expense of yahoo. MSFT grows because of their CORE businesses. Yahoo doesn't have diddley to fall back on.
It's the SHAREHOLDERS that got caught in Yangs EGO TRIP and THERE WEALTH is a drop in the bucket but that DROP is what has kept yahoo's stock from going BACK TO $10 as it happened TWICE before.
There's gonna be hell to pay and a NEW SLATE of directors will easily win over.....MSFTs slate without a proxy fight.
Well... Google will let yahoo live barely, so that they can say it's not a monopoly. Poor yahoo. They blew their last chance. They will face harsh reality as early as from Monday...