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MSFT-YHOO-GOOG: High-Stakes Chess Match Ain't Over Yet

Posted May 09, 2008 12:13pm EDT by Aaron Task in Investing, Internet, Venture Capital, M and A, IPOs

Is Microsoft giving Yahoo a face-saving way to come back to the negotiating table? That's one interpretation of Microsoft's latest statements and decision to dismantle is proxy board slate. It's also a plausible explanation for why Yahoo shares have been so surprisingly strong this week.

Overnight, Bill Gates reiterated his prior comments about how Microsoft is now " focused on its independent strategy," but he didn't totally rule out a deal. Neither did chief strategy officer Craig Mundie, whose comments yesterday included plenty of wiggle room, as Henry Blodget writes.

"Yahoo could always come back again and say please buy us for $33 (a share) and I'm sure we might reconsider it, but we're not assuming that's going to happen," Mundie said.

The bottom line is the ball is in Yahoo's court, as Henry and I discussed earlier this week -- and Microsoft is signaling it would be receptive to negotiations.

Also, Microsoft's decision to release members of the proxy board slate from their obligations could be viewed as a sign the company isn't planning a hostile offering -- not that it's totally ruled out doing a deal (period).

Meanwhile, Sergey Brin made some effusive comments about Yahoo yesterday, saying Google remains open to doing an outsourcing deal, refuting rumors to the contrary. On another level, Brin is helping Tech Ticker's parent maintain some leverage on the chance Yahoo chooses to revive negotiations with Google's archenemy, Microsoft.

29 Comments

invex431
invex431 - Friday May 09, 2008 12:42PM EDT

Talk about over-analyzing a perfectly reasonable comment. What is Mundie suppose to say, that we will never consider $33 again?

you
edk3042 - Friday May 09, 2008 12:42PM EDT

....yahoo will sell above 33.......soon

Dray Mc Clure
Dray Mc Clure - Friday May 09, 2008 12:53PM EDT

hmm .. 35$ should be face-saving for both parties and sharholders would be happy too

Greeneyes107
Greeneyes107 - Friday May 09, 2008 12:56PM EDT

Do you really think Steve is will to pay more than 33 for yahoo or anyone else for that matter? I don't think so. And I'm curious as to the affect yahoo teaming up with google will have on yahoo's stock prices. I really think it's counterproductive for yahoo to team up with google. That's like Burger King collabing with McDonalds.

you
Mon - Friday May 09, 2008 12:59PM EDT

Of course MSFT is still interested. This is the only remaining growth driver aside from social networking in the hi-tech category. All others have flatlined including all of MSFT's products.

Yahoo! Finance User
Yahoo! Finance User - Friday May 09, 2008 01:02PM EDT

man you guys really LOVE bringing down yahoo...I think your "analysis" will be a little more credible if you could wipe that smirk off your faces...(the dynamic of you too is not different from a 6 year old bully coercing the 4 year old who lives next door....guess who is who) you are still reporting on the endeavor of thousands of people who work for these companies..sacrificing their lives and those of their loved ones...get some "perspective" for a change.

katsu
katsu - Friday May 09, 2008 01:07PM EDT

man you guys really LOVE bringing down yahoo...I think your "analysis" will be a little more credible if you could wipe that smirk off your faces...(the dynamic of you too is not different from a 6 year old bully coercing the 4 year old who lives next door....guess who is who) you are still reporting on the endeavor of thousands of people who work for these companies..sacrificing their lives and those of their loved ones...get some "perspective" for a change.

you
diabloxxrider - Friday May 09, 2008 01:13PM EDT

yahoo is going down! when the heck are retail investors ever going to learn!

you
AnInfiniteDream - Friday May 09, 2008 01:21PM EDT

How exactly do both Google Finance and Yahoo Fiance have the same WRONG trailing 12 month PE ratio listed for YHOO????? I checked marketwatch.com and they have it right. Yahoo's PE is about 55, not 34 like both Google and Yahoo have listed. This is like 5th grade math. From June '07 to March '08 YHOO earned 0.48. It's current price of about 26 puts it at about a 54 PE (26/0.48). BOTH YAHOO AND GOOGLE FINANCE THOUGH HAVE IT LISTED AT 34. I already notified yahoo a while ago and they still haven't fixed the problem. SEC anyone?????

you
gotcherback2 - Friday May 09, 2008 01:22PM EDT

the money is coming.....................

matt m
matt m - Friday May 09, 2008 01:23PM EDT

why is the stock going up? Well the hedge funds are buying it up so they can dismantle the board and sell the company to microsoft. It might take a year but it will get sold. Also the company isn't worth more the 33 and microsoft shouldn't pay a penny more.

arthur_baboney
arthur_baboney - Friday May 09, 2008 01:29PM EDT

Its over for christ sakes and that is good for Yahoo. Yahoo will never be sold at such a cheap rice like $38 a share. Yahoo price is out of Microsofts league.

you
patrick s - Friday May 09, 2008 01:40PM EDT

Yahoo management is in trouble, but you have to take your hat off to them for dealing tough. Microsoft needs yahoo if they are to compete with Google. All three companies know it, Pretty exciting.

Steve Slater
Steve Slater - Friday May 09, 2008 01:40PM EDT

I agree the latest round of moves are face saving for both sides, I see Microsoft offering $34 over the weekend and Yahoo accepting. Neither side wants a proxy fight, but both of them want to do this deal.

you
dibsnextinline - Friday May 09, 2008 01:49PM EDT

as of today yahoo 35 bucks and holding and the bears are everywhere. if msft is aquiring shares for a take over they may force the price of it up as they do

Yahoo! Finance User
Yahoo! Finance User - Friday May 09, 2008 01:55PM EDT

The risk arbs are taking a bath on this. Rather than unload it all at 20, they're going to pump this rumor for all they can while they unwind their huge positions.

you
Yahoo! Finance User - Friday May 09, 2008 02:01PM EDT

"Microsoft giving Yahoo a face-saving way to come back to the negotiating table?" You are kidding. If someone needs to be saved it's Mr. Ballmer and MSFT. They have literally nothing to show on the growth IT area, just expensive failures, just like in their traditional core business lately. If you want a good laugh, just GOOGLE and read MSFT press releases, CEO comments on their new products from the past decade. It's hilarious to see what they aimed for and what they achieved. MSFT is a technology dinosaur, disparate for some evolutionary miracle, before time runs out.

you
Yahoo! Finance User - Friday May 09, 2008 02:06PM EDT

Yahoo break-up value is above $33, so it's ridiculous to think lower. Those that do seem to believe the Jan low of $19 didn't correlate to Google low around $430. Yahoo has traded in the mid to upper 20's with Oct 2007 52-week high of $34.08. It's understood MSFT needs Yahoo to advance into a fluid market faster than if they try on own which has failed miserably over last number of years. Yahoo / MSFT standoff was $37 versus $33, thus, $35 seems reasonable if MSFT truly wants a deal. Otherwise, Yahoo outsources some search to Google, sees approx $700 million increase in revenues and focuses efforts on building other products. And the analogy of Burger King and McDonalds, if Burger King could have McDonalds cook hamburgers for much less and increase profits they would outsource such activity.

you
whoshero88 - Friday May 09, 2008 02:15PM EDT

Yahoo shareholders LISTEN UP.....sell your shares before it tumbles. come on there is no deal for MSFT and YHOO. MSFT is no gonna pay a dime more for YHOO, thats obvious why they walked away from the deal. if they reapproach to YHOO that will be mainly due to be YHOO willingness to sell. even if there is gonna be a deal...it wont happen anytime soon. why waste your time on this kinda of prolong BullSH**, then sell your share and buy some other stocks. YHOO has no futures, only options for YHOO is to sell itself.

soma
soma - Friday May 09, 2008 04:55PM EDT

Suggest if you want to analyze, do so seriously without the ridicule in your tone. The story u r presenting is serious - involves real money ,real jobs and real customers

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