Microsoft Abandons Yahoo Acquisition

[slugger]

Microsoft has dropped its nearly three-month-long pursuit of Yahoo, ending a historic acquisition attempt whose failure takes Microsoft back to square one in its quest to boost its online business to better compete against Google.

"We continue to believe that our proposed acquisition made sense for Microsoft, Yahoo and the market as a whole. Our goal in pursuing a combination with Yahoo was to provide greater choice and innovation in the marketplace and create real value for our respective stockholders and employees," said Microsoft CEO Steve Ballmer in a statement distributed early Saturday evening.

Yahoo did not immediately reply to a request for comment.

Microsoft had raised its initial bid by about US$5 billion, but that didn't convince Yahoo to accept the revised offer, Microsoft said. "After careful consideration, 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," said Ballmer.

All parties with a stake in the deal had been waiting for Microsoft to announce its next move, after Yahoo failed to agree to a deal by last Saturday, the deadline Microsoft had set three weeks earlier.

But Microsoft stayed silent for days, as observers speculated whether it would walk away or prepare a hostile takeover. However, on Friday anonymously sourced reports in The Wall Street Journal and The New York Times said that Microsoft and Yahoo had turned a corner and were for the first time negotiating merger terms in earnest.

Ultimately, it seems that Microsoft's management, fatigued by Yahoo's resistance and demands, decided that engaging in a proxy fight to oust Yahoo's directors would be an arduous and nasty process. After all, for Microsoft, the goal of the massive acquisition was to quickly become a mightier competitor to Google in online advertising.

As soon as Microsoft announced its bid for Yahoo on Feb. 1 -- valued at US$44.6 billion at the time -- Yahoo's management began seeking and considering alternatives, while its stock began to rise from the latest pre-bid price of $19.18.

By the time Yahoo's board formally rejected the unsolicited offer on Feb. 11, saying it undervalued the company, Yahoo's stock price had risen to $29.87, erasing the offer's premium. The next day, Microsoft hinted in a letter to Yahoo that it wouldn't shy away from attempting a hostile takeover.

Meanwhile, several media reports appeared -- all attributed to anonymous sources -- that Yahoo CEO and cofounder Jerry Yang was holding conversations with Google, AOL, Disney and News Corp., exploring alternative deals that would strengthen Yahoo's business and thus relieve the pressure to accept Microsoft's offer.

On April 5, Microsoft, clearly impatient, threatened Yahoo's board of directors with a proxy battle if it wouldn't agree to a buy-out in the next three weeks. That deadline passed last Saturday.

No alternative deal ever materialized for Yahoo, except for a very limited, albeit eyebrow-raising, test that saw Yahoo run Google ads along with some search engine results on Yahoo.com. Observers speculated that the test, announced on April 9, could lead to a full-blown outsourcing of Yahoo's search ad business to Google, a move that financial analysts believe could boost Yahoo's revenue. Press reports last week indicated that Yahoo and Google might still enter into such a deal.

Yahoo also made overt maneuvers to buy itself time. For example, on March 5, Yahoo lifted the following week's deadline for nominating directors to its board, an attempt to discourage Microsoft from launching a proxy fight to replace the current board with members willing to approve its Yahoo acquisition bid.

On March 18, it kicked off a tour to investors by dusting off a three-month-old financial plan to reinforce its contention that Yahoo is worth much more than Microsoft offered to pay for it. The plan, which had originally been presented to Yahoo's board in December, predicts that Yahoo will double its operating cash flow over the next three years from US$1.9 billion to $3.7 billion. The plan also forecasts that, subtracting the commission that Yahoo pays to sites in its advertising network, Yahoo will generate $8.8 billion in revenue in 2010. Financial analysts agreed the plan is highly optimistic.

Yahoo also got into hyperactive mode with product and strategy announcements after Microsoft's bid, always pointing out that each initiative proved that it is able to improve its situation as an independent company. For example, it acquired online video player Maven Networks, announced its social network OneConnect mobile service, re-launched its video site and introduced Yahoo Buzz, a social news site that has been very well received.

It also announced AMP, a new advertising management platform that it says will "significantly simplify" buying and selling ads online and that will roll out in phases starting in 2008's third quarter and continuing into 2009. Yahoo also added video to Flickr and joined Google's OpenSocial project of common APIs for social networking applications.

It also recently announced its most ambitious plan yet to take advantage of the popularity of social networking. Yahoo Open Strategy (YOS) calls for the company to swing wide open the doors of its Web platforms to let outside developers create applications across its network of sites, starting with its search engine via a beta project called Search Monkey.

Of course, there have been also reminders of why the company found itself an acquisition target. The most concrete of these reminders was on Feb. 12, when Yahoo started laying off about 1,000 staffers. Meanwhile, prominent executives like Bradley Horowitz, vice president of product strategy, voluntarily departed, in Horowitz's case to arch-rival Google.

As time passed, Microsoft's hopes of a swift acquisition and integration evaporated. Ballmer maintained all along that the offer was fair and seemed perplexed that Yahoo didn't jump to accept it. At the prospect of a dragged out proxy fight, to be followed by a complicated and lengthy integration of MSN and Yahoo, Ballmer apparently grew increasingly disenchanted.

If Microsoft had $40-plus billion to spend on Yahoo, it can certainly go shopping for the many startup and niche companies that have gained traction in the Web 2.0 space in areas like social networking, social news, video, Web-hosted applications and mobile advertising.

Considering Ballmer's well-known competitive nature, he will dust himself off and draw up another plan, because one thing is clear: while he is giving up on acquiring Yahoo, he is certainly not giving up on his dream to top Google in online advertising, particularly in search.

"We have a talented team in place and a compelling plan to grow our business through innovative new services and strategic transactions with other business partners. While Yahoo would have accelerated our strategy, I am confident that we can continue to move forward toward our goals," Ballmer said in Saturday's statement.


"We are investing heavily in new tools and Web experiences, we have dramatically improved our search performance and advertiser satisfaction, and we will continue to build our scale through organic growth and partnerships," said Kevin Johnson, Microsoft president for platforms and services, in the statement.

As of the end of 2007's third quarter, Google had almost 25 percent of the U.S. Internet advertising market, up from almost 21 percent in 2006's third quarter, according to IDC. Meanwhile, Yahoo's share during this period dropped to 11.3 percent from 12.3 percent, while Microsoft's declined to 5.2 percent from 5.8 percent, according to IDC.

In search usage, Google held a commanding 62.4 percent of queries worldwide, followed by Yahoo in a very distant second place with 12.8 percent, according to comScore. Microsoft ranked fourth with 2.9 percent, after Baidu with 5.2 percent.

In November, Yahoo ranked first in the U.S. in display ad impressions with a 19 percent share, while Microsoft came in third with 6.7 percent, after News Corp.'s Fox Interactive (16.3 percent), according to comScore. Google took seventh place with 1 percent.

Source

Ballmer's e-mail to staff on Yahoo

[praka123]

I dont think so

[slugger]

Originally Posted by praka123

I dont think so

?????

got it from the RSS feed

[praka123]

^yes!u r correct.the local newspaper reported that M$ is again bidding
but they corrected in their portal
http://www.manoramaonline.com/cgi-bi...RIAL&BV_ID=@@@

[iMav]

increased bid by MS, nothing disclosed by any 1, no 1 is saying anything, negotiations are going on

[Pathik]

Yahoo refused even after the bid was increased to $50 bn na?

[iMav]

^^ nothing like that yet, no 1 is saying anything, no 1 is even confirming that the bid has been upped, all indications are that negotiations are going on

[x3060]

i hope they dont take over and spoil them . .

[iMav]

looks like it has ended

[slugger]

r u all reallly sure d negotiations still goin on??

bee checking out all the [serious] News chanels - no reports to d contrary coming out

[iMav]

ya it has ended sorry for the confusion my info was outdated

[slugger]

^^^u ment the weekend meeting where it was all supposed to be finalized

[Cyrus_the_virus]

The world is saved! phew...

Yahoo messenger is saved from crap MSN messenger, yahoo mail is saved from crap live mail, yahoo search is saved from crap MSN search(which is proven that no one uses except when someone accidently ends up getting redirected when searching things inside the computer)

And most of all.. yahoooooooooo..... FTW..

[praka123]

^exactly!

[Hrithan2020]

Originally Posted by Cyrus_the_virus

The world is saved! phew...

Yahoo messenger is saved from crap MSN messenger, yahoo mail is saved from crap live mail, yahoo search is saved from crap MSN search(which is proven that no one uses except when someone accidently ends up getting redirected when searching things inside the computer)

And most of all.. yahoooooooooo..... FTW..

Totally agree with u.In India,MSN doesnt enjoy much popularity;but surprisingly MSN still has a sizeable audience(nowhere near google of course or even yahoo).But I hope MS wastes its time & resources by spending 60 Billn after even further talks & threats.By that time,Google could strike back with more cool products & could serious into more markets(mobile markets etc) & make its presence felt there too.

[Cyrus_the_virus]

Come on.. everybody say Yaaahoooooooooo.. come on.. together.. Yaaahoooooo...

[Faun]

junglee kahi ke

must admit Yahoo is ahead in few scenario as compared to google

[Pathik]

Yahooooooooooooooooo

[iMav]

Yahoo almost sold itself at $37/share.

This is interesting, according to Seattle Pi blogger Todd Bishop, here are the sequence of events with timeline:

Jan. 31: Microsoft CEO Steve Ballmer calls Yahoo CEO Jerry Yang to inform him that Microsoft will make an unsolicited offer for the Internet company.

Feb. 1: Microsoft goes public with acquisition bid of $31 per share, or $44.6 billion.

Feb. 11: Yahoo turns down the offer, saying it "substantially undervalues" the company.

April 5: Ballmer gives Yahoo a three-week deadline for coming to terms. Following that letter, Microsoft starts exploring other alternatives, as well, including its own discussions with AOL and News Corp.

April 15: Senior Microsoft and Yahoo executives meet in Portland, Ore., during a session also attended by Yahoo's bankers. They discuss issues including potential cultural challenges that would come up in the integration of the two companies. Yahoo gives a presentation about its financial prospects. Microsoft asks Yahoo to name a price for the company. Yahoo declines. The two sides agree that, until at least April 26, neither will publicly disclose the fact that they have met, although either can terminate the agreement after that point.

April 18: In a phone call involving Microsoft and Yahoo bankers, Yahoo tells Microsoft that it will take at least $40 per share to strike an amicable deal.

April 26: The three-week deadline passes.

April 29 (last Tuesday): In phone conversations, Yang and Yahoo Chairman Roy Bostock indicate to Ballmer that a deal below $40 per share could be possible. Alternatively, they suggest that the companies might work out some sort of search-related alliance.

April 30 (last Wednesday): The companies meet in the Bay Area. Those in attendance include Ballmer, Microsoft Platforms and Services President Kevin Johnson, and their Yahoo counterparts. Yang names a price of $38 per share.

Saturday: Yang and Yahoo co-founder David Filo fly to Seattle and meet with Ballmer and Johnson at the airport. By this point, Microsoft has indicated that it's willing to raise its offer to $33 per share. (The value of the original cash-and-stock offer had slipped below $30, based on a decline in Microsoft's share price following the announcement.)

Yang and Filo say the Yahoo board would be amenable to a price of $37 a share. They fly back to California. After they arrive home, Ballmer calls Yang to say that Microsoft is walking away from its offer. Saturday evening, Microsoft announces its decision.

Source

thank you sir ballmer, now if you don't mind please focus on buying web 2.0 start-ups which is a much better option than a crappy yahoo, yes i say yahoo crappy, coz i use none of it's service.

[nvidia]

Thats gr8 news!

[slugger]

i initialy found it a lil' strange yesterday that M.S. did not approach the shareholders directly

but it make sense not to do so at the moment

current slowdown in the U.S economy and a predicted recession would make it difficult for M.S to tide over the after-effects of a hostile takeover as quickly as it would have been possible had the economy been on the upswing.

[iMav]

was watching bbc, they were running the story and it was pretty clear from their analysis that monday morning market opening is gonna sse yahoo shares go down, they rose 50% since MS announced their offer, there is discontent amongst some share holders already, not to mention that they also said previously Oracle was trying to take over a certain company which declined but after some time sold itself to oracle.

my guess is that stevo played a master stroke by backing off and the letter contents, pissed off share-holders, fall in share prices would make life a bit difficult for mr. yang, considering that he already was ready to sell yahoo at $37/share

[anispace]

Investors pummeled Yahoo Inc. stock Monday, sending the company's shares down 15 percent after Microsoft Corp. dropped its high-profile takeover bid for the Web portal over the weekend.

Yahoo shares fell $4.30 to $24.37 in the first day of trading after Saturday's announcement. The sell-off suggests that many shareholders wanted a merger.

With none imminent, some disappointed investors plan to revolt by voting against all of Yahoo's board members at the next annual meeting. Yahoo faces the prospect of shareholder lawsuits for failing to accept a deal, adding to the handful filed over the past few months that are already winding through the courts.

src

looks like yahoo`s in some deep sh*t now

[slugger]

next time M.S. makes a bid for Yahoo!, it may do so at an even lower price

[cvvikram]

Yahoo has said that it is still open for accepting a good offer from Microsoft

read more...

http://money.cnn.com/news/newsfeeds/...43f6396587.htm

[iMav]

see what happens when u mess with the big boys, u get b!tch slapped, Ballmer was the 1 who said bye to yahoo and that too because yang made comments that indicated a google affair to make matters worse for MS and all the orum members here started shouting yahoo yahoo ab kya hua .... ab bolo yahoo, i said it before too ballmer played a master stroke by saying f off to yahoo

It's Microsoft world kid, I'm just living in it

[desiibond]

From what I see, MS is doing that tactic where you start walking out if you do not strike a good deal with the seller and then the seller says "Stop, let me sell for this price xxx".

[iMav]

^^ the same was done by oracle with regards one of their deals

[MetalheadGautham]

Originally Posted by iMav

^^ the same was done by oracle with regards one of their deals

which one ?

and I still don't think MS will have any benifit with this deal. Only difference is, their search results will show more results, but they will still be crap. Google owns with respect to GMail and Google Search, but Live Search and HotMail are still better than their yahoo counterparts. So MS won't have much benifit.

If they DO want to get some serious bucks with a deal, they should concentrate on territories unexplored by google like internet gaming. I am sure MS will gain a lot by taking over Zapak for instance.

[desiibond]

^^Think that was for Peoplesoft. not sure though.