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Microsoft Employees Want to Kill Yahoo Deal

Posted Apr 24, 2008 08:57am EDT by Henry Blodget in Investing, Internet, Venture Capital, M and A, IPOs

From Silicon Alley Insider, April 24, 2008:

Two days before its fish-or-cut-bait deadline for Yahoo expires, Microsoft (MSFT) is sending messages to Yahoo (YHOO) shareholders through the press again. But regardless of Microsoft's ulterior motives, these messages ring true:

The last message was delivered through the WSJ this evening, when Microsoft leaked the names of the some of the directors on its board slate. The first message--we might walk away--was delivered in Milan on Thursday, by Steve Ballmer himself. And the middle message--lots of Microsoft employees hate the deal and want us to drop it--was also delivered this evening through the Wall Street Journal.

And we believe it.

Why?

Because, like us, some Microsoft employees think that Microsoft has other things to worry about besides competing with Google in search and display ads. Specifically, says the Journal,

Inside Microsoft, unrest over the Yahoo deal is focused in two areas: people in Microsoft's online services group worried about their future and people in other Microsoft divisions who believe the task of absorbing Yahoo will divert top management's attention and other resources away from other pressing challenges, say the people familiar with the matter.

Concern about Yahoo is also fueling what some Microsoft employees say is high attrition in the company's online services group, in particular the teams who sell online advertisements.

Mr. Ballmer and other proponents of the deal have done little to communicate their thinking on the deal internally after an initial wave of statements, say people familiar with the company.

Microsoft didn't include this in tonight's message to Yahoo shareholders, but we also think another constituency is lobbying Steve Ballmer to walk away from the deal--Microsoft's shareholders.

When Microsoft announced its bid, its stock dropped, and every time cracks appear in the deal, its stock rises. We think some Microsoft shareholders agree with us that a Yahoo acquisition will be a disaster, and we think others just think it's an unnecessary waste of $44 billion. So we expect Steve is hearing "walk away, walk away" not just in Redmond corridors but in one-on-one meetings with big institutional shareholders.

So, yes, all this is no doubt partially just a last-ditch attempt to scare Yahoo into caving. But we think there's also some truth to it.

See Also: Why the Microsoft-Yahoo Deal Will Be A Disaster

25 Comments

rollingstonegathersnomoss
rollingstonegathersnomoss - Thursday April 24, 2008 09:27AM EDT

Henry aint got a clue in the world. lol

Legion General
Legion General - Thursday April 24, 2008 09:28AM EDT

Do NOT just walk away...RUN like the WIND from this proposed acquisition! Let the stock drop back to low 20s or at best just lower bid 50%.

Catherine
Catherine - Thursday April 24, 2008 09:32AM EDT

MSFT / Yahoo -Why climb the tree for the fruit, when it will fall very soon?

__A_YAHOO_USER__
__A_YAHOO_USER__ - Thursday April 24, 2008 09:51AM EDT

What do you know, more biased reporting by Yahoo about the Yahoo/Microsft merger... Now isn't that ethical!

AnInfiniteDream
AnInfiniteDream - Thursday April 24, 2008 09:53AM EDT

MSFT is nuts. I wouldn't pay more than $10/share for Yahoo, and that's still probably too expensive. I'd say $7 to $10 per share which is like a 15 to 20 PE. Rob L

Mary
Mary - Thursday April 24, 2008 09:57AM EDT

Microsoft can put all that cash in a risk free account an earn double what Yahoo will earn Microsoft. Yahoo stock will dive back to 17. Then let the shareholders sue Yahoo for missing a great deal. Run away Microsoft as fast as you can an you will not be sorry.

Jim C
Jim C - Thursday April 24, 2008 09:58AM EDT

As a yahoo user, I’ve observed its deterioration especially over the last 6 months. Very little content for home page; lots of articles leading to advertiser promos. With Microsoft abandoning XP in favor of Vista, my next computer but will be Apple. Buying Yahoo will accelerate Microsoft’s gradual demise

__A_YAHOO_USER__
__A_YAHOO_USER__ - Thursday April 24, 2008 09:59AM EDT

By a guy who was prosecuted for securities fraud and banned from working with securities for life by the SEC, none the less!

Edwin
Edwin - Thursday April 24, 2008 10:07AM EDT

I don't see buying at this point in time. Later when the economy corrects further, and the adds slow you will see Yahoo lower. Time is on Microsft side

anthony
anthony - Thursday April 24, 2008 10:09AM EDT

run don't walk,it's not worth half the price

Nocturnal_Insomniac
Nocturnal_Insomniac - Thursday April 24, 2008 10:14AM EDT

Yahoo is a POS, Crappy AP news, found excuses on the finance page, dating scam, and a shitty IMS. At least microsoft has concentrated on making only crappy OS's

Nocturnal_Insomniac
Nocturnal_Insomniac - Thursday April 24, 2008 10:14AM EDT

Yahoo is a POS, Crappy AP news, found excuses on the finance page, dating scam, and a shitty IMS. At least microsoft has concentrated on making only crappy OS's

TedT
TedT - Thursday April 24, 2008 10:19AM EDT

Only Microsoft with its world wide infrastracture could exploit the inherent potential of Yahoo and especially Yahoo's holdings of Alibababa (sort of Cinese Coogle). Microsoft should sweeten the offer. Let's say to $40/share, I dont think Yahoo will settle for less. I am afraid they might ask $50/share.

Neo
Neo - Thursday April 24, 2008 10:20AM EDT

I am amazed. People think msft makes all this money online. They have been trying for 10 years and have consistently lost millions every year. When everone else is making billions in advertising it is pathetic that softy can't turn profits. They need yahoo! if they ever want to see profitability in online segment of business.

Vafer
Vafer - Thursday April 24, 2008 10:21AM EDT

WTF? you can either "recommend this post," or "recommend this post." What the frak? Why is there no Digg style yay or nay on a story? Is this why Yahoo is where it is?

__A_YAHOO_USER__
__A_YAHOO_USER__ - Thursday April 24, 2008 10:27AM EDT

As a msft shareholder - I am hoping they run away from this deal.

robert
robert - Thursday April 24, 2008 10:46AM EDT

I'm taking this opportunity to beg msft to stay away from non core business deals and either fix the broken vista garbage or do away with it completely. If XP is eliminated, my next computer will definitely be an Apple..

johnw
johnw - Thursday April 24, 2008 10:57AM EDT

Number of webpage hits is a huge measure by which most internet sites are valued. For the longest time Yahoo users with more than one account would have to go back to the main page when signing in to a different account. This, I think, would appear as another "unique" hit thus inflating Yahoo's results. This scenario can be further validated by Yahoo's recent change to its "myyahoo" feature. The old page is being migrated to a new version. Initially, keeping the old page was an option. As of today it seems that if you want a "myyahoo" page you have to set it all up again. Essentially Yahoo is taking inventory and has no idea of the number of unique hits it receives on a given day. The question then is, how do you value a business without knowing its inventory?

just a man
just a man - Thursday April 24, 2008 12:32PM EDT

Microsoft gets Macrohard and crushes turds like you Hank.

lo
lo - Thursday April 24, 2008 01:57PM EDT

Don't walk away. As an investor, I love to see they fight. Bob should do something like: Hostile - WalkAway - H - WA. That is how you make money.

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