Saturday, May 3, 2008

Never mind

After saying for 3 months that it wanted to buy Yahoo, on Saturday night the owner of said (to quote Emily Litella) “Never mind.”

Why did Microsoft throw in the towel on Yahoo? To summarize utterly conventional wisdom, I came up with 3 possible explanations:

First, Microsoft realizes a hostile takeover isn’t feasible, so Yahoo’s stalling will be rewarded with its continuing independence.

Second possibility is the price (as Steve Ballmer said today). MS originally offered $31 a share, today raised it to $33, but Yahoo was holding out for $37.

Third, Microsoft knows that pulling its offer will yank the support under Yahoo’s shares. The stock closed Friday at $28.67, but will open Monday below $25 and may fall next week as low as $20.

Current owners already wanted Yahoo to take the deal, but the collapse of Yahoo’s shares will certainly cause shareholders to light a fire under management. If management can’t get the shares above $30, shareholders with force management to sell the company — even if it is to Microsoft.

No comments: