Microsoft steps back from Yahoo bid

[AppleInsider]

A takeover that would have created one of the largest single rivals to Internet giant Google has been abruptly canceled, as Microsoft has formally withdrawn its bid to acquire Yahoo.

Microsoft CEO Steve Ballmer has confirmed the move Saturday evening in a letter that has been delivered to Yahoo chief Jerry Yang as well as published online.

The Microsoft executive has revealed that his company earlier this week raised its bid from $31 per share to $33, but claims that a combination of Yahoo's demand for an even higher bid and deliberate attempts to sour the deal have made any takeover unrealistic. He also contradicts a recent rumor that a hostile takeover was close, instead saying that any attempt to circumvent the Yahoo board with a proxy battle would be destructive.

"It is clear to me that it is not sensible for Microsoft to take our offer directly to your shareholders," Ballmer explains. "This approach would necessarily involve a protracted proxy contest and eventually an exchange offer. Our discussions with you have led us to conclude that, in the interim, you would take steps that would make Yahoo! undesirable as an acquisition for Microsoft."

Some of these steps have included recent gestures towards a permanent deal with Google that would see at least some of Yahoo's search ads outsourced to its Californian neighbor. To Microsoft, the alliance would drive further business to Google, splinter Yahoo's own revenues, and push out many valuable engineers that Microsoft would consider crucial in any takeover.

The truce ends a more than three-month standoff between Microsoft and Yahoo, which began in late January when Microsoft publicly submitted a bid worth $44.6 billion in an attempt to create a larger rival to Google in the online ad and search marketplaces. Yahoo has rejected the offer since the beginning, claiming that Microsoft has underestimated Yahoo's value.

Apple has stood to feel at least a slight impact from the since nullified deal. While most of its web deals are with Google, the electronics maker has installed Yahoo search and weather tools on the iPhone and iPod touch, and allows Apple TV users to browse photo albums from Yahoo-owned Flickr.

Regardless of what may have occurred, Microsoft now plans to pursue its earlier strategy and will develop its ad and search businesses without Yahoo. This includes both its own staff and possible "strategic transactions" with other companies, according to Ballmer. However, the top-ranking Microsoft official says that his company has not changed its opinion of what the acquisition would have meant to its future.

"I still believe even today that our offer remains the only alternative put forward that provides your stockholders full and fair value for their shares," he says. "By failing to reach an agreement with us, you and your stockholders have left significant value on the table. But clearly a deal is not to be."

[solipsism]

Thank you Google. Though The doubling of Yahoo when MS first proposed this acquisition should make the drop quite a bit this week.

[jcassara]

Dear Steve:

It would behoove Microsoft if you worried less about the share value of another company and instead focused your efforts on the inferior products and out-of-touch marketing efforts of your company's computer software divisions. Have you seen your stock lately?

Sincerely,

The Computer Industry

[Tofino]

i'm sorry to read that. i thought this takeover had serious potential for great entertainment. like one of those disaster movies from the '70s, with a great cast, a painfully bad plot, and very cheesy effects.... i feel deprived!

[quinney]

lobotimus interruptus

[city]

it might not be over. Yahoo stock price might drop now and MS might try again.

[solipsism]

Originally Posted by city

it might not be over. Yahoo stock price might drop now and MS might try again.

It'll drop, but if MS makes another offer it will go up again. Not the doubling we saw this this last offer, but some. If MS wants Yahoo they'll have to come at it another way.

[bwik]

As with its products, MSFT has seen that its boorish antics are sapping its own power away, resulting in MS's inevitable decline.

If Ballmer had been a competent CEO from the free market (which he's not -- he is an unproven hack), he would have approached Yahoo much more sensitively.

As it was, Ballmer's aggression created risk and could have destroyed Yahoo, certainly making many of its key employees leave. The strength of a firm like that is not guaranteed to stick around. An atmosphere of entrepreneurship could easily melt away from Yahoo and it could die. Particularly if it had to link up with Microsoft.

Making Yahoo "compatible" with Microsoft's products would have been a death sentence for Yahoo. MS's whole strategy is to use power, aggression and fear to generate technology. Fortunately, it doesn't work that way anymore. MS is a dinosaur whose record in the last 10 years is of creative death and commercial stagnation. Their software is an amazing diagram of how to design software the wrong way, and make your users dislike the experience.

[Delfoniq]

I don't see how the whole thing broke down over just a petty $4 per share. On a serious note I don't think the Google monopoly is good news for anyone in the long term.

<Wakes up with a frozen Gmail account>

[Lester]

What was Balmer thinking? It will be interesting to see what sort of value the Yahoo! board can get for the shareholders in bankruptcy.

[bdkennedy1]

Hmmmm... maybe it has to do with Yahoo employees quitting over it. Or at least that's what my friends that work there called to tell me today. Oooops. Did I say that?

[winterspan]

Originally Posted by Tofino

i'm sorry to read that. i thought this takeover had serious potential for great entertainment. like one of those disaster movies from the '70s, with a great cast, a painfully bad plot, and very cheesy effects.... i feel deprived!

I entirely agree; it would have been fun to watch the implosion. Although at the same time, I couldn't help feeling sad watching Yahoo! being eaten up after a decade of use. I remember too many of the good old days of Yahoo during my youth!

Originally Posted by bwik

As with its products, MSFT has seen that its boorish antics are sapping its own power away, resulting in MS's inevitable decline.

If Ballmer had been a competent CEO from the free market (which he's not -- he is an unproven hack), he would have approached Yahoo much more sensitively.

As it was, Ballmer's aggression created risk and could have destroyed Yahoo, certainly making many of its key employees leave. The strength of a firm like that is not guaranteed to stick around. An atmosphere of entrepreneurship could easily melt away from Yahoo and it could die. Particularly if it had to link up with Microsoft.

Making Yahoo "compatible" with Microsoft's products would have been a death sentence for Yahoo. MS's whole strategy is to use power, aggression and fear to generate technology. Fortunately, it doesn't work that way anymore. MS is a dinosaur whose record in the last 10 years is of creative death and commercial stagnation. Their software is an amazing diagram of how to design software the wrong way, and make your users dislike the experience.

Excellent.

[winterspan]

Originally Posted by Tofino

i'm sorry to read that. i thought this takeover had serious potential for great entertainment. like one of those disaster movies from the '70s, with a great cast, a painfully bad plot, and very cheesy effects.... i feel deprived!

I entirely agree; it would have been fun to watch the implosion. Although at the same time, I couldn't help feeling sad watching Yahoo! being eaten up after a decade of use. I remember too many of the good old days of Yahoo during my youth!

Originally Posted by bwik

As with its products, MSFT has seen that its boorish antics are sapping its own power away, resulting in MS's inevitable decline.

If Ballmer had been a competent CEO from the free market (which he's not -- he is an unproven hack), he would have approached Yahoo much more sensitively.

As it was, Ballmer's aggression created risk and could have destroyed Yahoo, certainly making many of its key employees leave. The strength of a firm like that is not guaranteed to stick around. An atmosphere of entrepreneurship could easily melt away from Yahoo and it could die. Particularly if it had to link up with Microsoft.

Making Yahoo "compatible" with Microsoft's products would have been a death sentence for Yahoo. MS's whole strategy is to use power, aggression and fear to generate technology. Fortunately, it doesn't work that way anymore. MS is a dinosaur whose record in the last 10 years is of creative death and commercial stagnation. Their software is an amazing diagram of how to design software the wrong way, and make your users dislike the experience.

Excellent analysis.

[fraklinc]

Can you believe that ballmer said at the Mix keynote that this was a done dealnow google is going to take yahoo under it's wings & microsoft will face there worst fear Apple, Intel, Goggle & Yahoo will make History

[JeffDM]

Originally Posted by Lester

What was Balmer thinking? It will be interesting to see what sort of value the Yahoo! board can get for the shareholders in bankruptcy.

Bankrupcy? Maybe you should stop reading the FUD. Yahoo is in the black.

[ascii]

Yahoo overplayed their hand. They could have had $$$

[eAi]

I wonder if Yahoo! will drop the Google deal or keep it for protection. There's clearly limits how far Google & Yahoo! can snuggle up together, but they may want to keep a token link...

[Walter Slocombe]

I think this only strengthens Yahoo, they actually said NO to M$

I like the reaction given by Yahoos Roy Bostock who dismissed the unsolicited bid as a "distraction"

M$ ARE a distraction as a company as windows is as an operating system.

[digitalclips]

Originally Posted by fraklinc

Can you believe that ballmer said at the Mix keynote that this was a done deal

I missed that lol. Nearly as bad as 'Mission accomplished' ...!

[JeffDM]

Originally Posted by ascii

Yahoo overplayed their hand. They could have had $$$

Maybe it's not just about the money. As a percentage increase, how much money more money would you want over what you already earn, to be Balmer's personal butler?

[Kolchak]

Originally Posted by Lester

What was Balmer thinking?

Wait, Ballmer can think? I wasn't so sure after the "monkey boy" episode of a few years ago.

[satchmo]

Originally Posted by Delfoniq

On a serious note I don't think the Google monopoly is good news for anyone in the long term.

No it isn't. But there are better ways at tackling this than buying up Yahoo. Microsoft has got to focus on something...and not just react to the latest trends. And whatever that is, do it well. They've become a laughing stock..a dinosaur so to speak.

Yes, they're still rich and powerful, but I'd like to see where they are 5 years from now. It's a fast downward spiral in the tech world.

[JeffDM]

Originally Posted by Delfoniq

I don't see how the whole thing broke down over just a petty $4 per share. On a serious note I don't think the Google monopoly is good news for anyone in the long term.

<Wakes up with a frozen Gmail account>

Is there really a Google monopoly, or are you saying there is a Google monopoly because you think it is one?

[solipsism]

Originally Posted by satchmo

No it isn't. But there are better ways at tackling this than buying up Yahoo. Microsoft has got to focus on something...and not just react to the latest trends.

Does anyone have any ideas on how MS could use it's funds to compete better with Google?

Yes, they're still rich and powerful, but I'd like to see where they are 5 years from now. It's a fast downward spiral in the tech world.

In five years I see MS having quite a bit more money than they do now. in 2007 they generated $51 Billion with a Net income of $14 Billion (27%).

They will lose a little more of the desktop marketshare to OS X and Linux, and lose a higher percentage of the browser marketshare to FF and Safari, but all that is merely plucking a couple strands of hair on a giant. The EU ruling against MS in 2007 hurt them far more deeply than the loss of desktop browser marketshare has. They aren't going anywhere anytime soon.

[ascii]

Originally Posted by solipsism

Does anyone have any ideas on how MS could use it's funds to compete better with Google?

Google is betting the world is going to settle on a lightweight client model, with the apps and documents in the cloud. I think they're wrong - the documents will migrate to the cloud, ala iDisk, but the apps will stay where they are (except for very simple widgety type things). So MS is in the stronger long term position. What they need to invest in is a very fast, very high capacity free iDisk type thing.

[mstone]

Originally Posted by Delfoniq

I don't see how the whole thing broke down over just a petty $4 per share.

Each dollar per share adds a billion dollars to the sale price.

[MacTel]

Originally Posted by bdkennedy1

Hmmmm... maybe it has to do with Yahoo employees quitting over it. Or at least that's what my friends that work there called to tell me today. Oooops. Did I say that?

It was premature to quit before the deal was done.

Maybe Microsoft will take its offer and buy up Facebook instead.

[Lester]

Originally Posted by JeffDM

Bankrupcy? Maybe you should stop reading the FUD. Yahoo is in the black.

It is easy to get a company into the black when you downsize through a hiring freeze and a reduction in R&D. But hey, how many shareholders care about tomorrow.

[solipsism]

Originally Posted by Lester

But hey, how many shareholders care about tomorrow.

All that will be holding shares tomorrow.

[Delfoniq]

Originally Posted by JeffDM

Is there really a Google monopoly, or are you saying there is a Google monopoly because you think it is one?

Of course there is a monopoly, the numbers speak for themselves.

I agree with you though. Google is not always the fastest or most complete and relevant search, but the fact is that most people are mentally convinced that it is. Maybe because we're all creatures of habit, and we all use Google despite the fact that there are similar or even better search engines out there.

[Chucker]

Originally Posted by Lester

It is easy to get a company into the black when you downsize through a hiring freeze and a reduction in R&D. But hey, how many shareholders care about tomorrow.

Every single quarter since II/02 has been profitable. Revenues have grown from 225.8 million to 1.817 billion since. But yeah, surely that's just "through a hiring freeze and a reduction and R&D".

[diskimage]

Originally Posted by Delfoniq

I agree with you though. Google is not always the fastest or most complete and relevant search, but the fact is that most people are mentally convinced that it is. Maybe because we're all creatures of habit, and we all use Google despite the fact that there are similar or even better search engines out there.

What are these other better search engines? I am not a search engine expert but the best one I have used so far is google.
Windows live search is terrible.

[Slewis]

Null.

[winterspan]

Originally Posted by Delfoniq

Of course there is a monopoly, the numbers speak for themselves.

I agree with you though. Google is not always the fastest or most complete and relevant search, but the fact is that most people are mentally convinced that it is. Maybe because we're all creatures of habit, and we all use Google despite the fact that there are similar or even better search engines out there.

You have a good point. Though at times, they have had the most relevant results, they've really been hit by the search engine spammers recently. I have jumped over to Yahoo and Ask once in a while, but I keep returning to Google. I think part of it is habit, part of it is avoiding all the nonsense on yahoo/ask/MSN, and the last part is that I religiously use Google's other services, such as Gmail - Maps - Reader - Analytics

[StuBeck]

Originally Posted by Walter Slocombe

I think this only strengthens Yahoo, they actually said NO to M$

I like the reaction given by Yahoos Roy Bostock who dismissed the unsolicited bid as a "distraction"

M$ ARE a distraction as a company as windows is as an operating system.

Huh? He said it was a distraction because he didn't want to sell the company. Saying no to Microsoft doesn't strengthen them at all.

BTW, your analogy makes no sense at all.

[MyopiaRocks]

Not to overthink things here... but Microsoft "backing away from the deal" is part of the acquisition negotiations. Yahoo's board is playing hard-to-get, and if Microsoft pushed too hard (hostile bid) they'd only succeed in:
1) Driving up Yahoo's price even further
2) Losing the best Yahoo employees (aka, "the whole point of the deal") to other companies (Google)
3) Sour the milk for all the remaining employees, and bring lots of gov't scrutiny on the deal when Yahoo execs cry for help.

Instead, Microsoft is doing the, "fine, then be that way; there are prettier women in this bar," routine. Yahoo's share price will drop this week, Yahoo execs will realize that their situation isn't tenable long-term, and they'll quietly start negotiating with Microsoft. Microsoft will get Yahoo at a cheaper price and with less animosity than if they'd continued with this full-frontal assault. ...or, at least, this is what Ballmer hopes will happen...

[SpamSandwich]

Originally Posted by JeffDM

Maybe it's not just about the money. As a percentage increase, how much money more money would you want over what you already earn, to be Balmer's personal butler?

I plan on taking part in any number of class-action lawsuits against Yang and company, since they clearly cannot offer shareholders value any more. They need to be fired for not coming to an agreement that made sense. They should have agreed on $34 or $35.

[minderbinder]

Originally Posted by Delfoniq

Of course there is a monopoly, the numbers speak for themselves.

I agree with you though. Google is not always the fastest or most complete and relevant search, but the fact is that most people are mentally convinced that it is. Maybe because we're all creatures of habit, and we all use Google despite the fact that there are similar or even better search engines out there.

So what is the best search engine these days?