Posted on Tue, Apr. 8, 2008
Yahoo Inc., responding yesterday to Microsoft Corp.'s weekend threat of a proxy fight that could result in a lower takeover price, said the current $44.6 billion offer must be raised before any merger could take place.
"We will not allow you or anyone else to acquire the company for anything less than its full value," Yahoo said yesterday in a letter to Microsoft chief executive officer Steve Ballmer. On Saturday, Ballmer gave Yahoo three weeks to reach a deal or become the target of Microsoft's first hostile takeover.
Yahoo, owner of the most-visited U.S. Web site, said it was not against a combination with Microsoft at a superior price, and rejected Ballmer's charge that its business has deteriorated. Yahoo called Microsoft's threat "counterproductive" and was still evaluating alternatives to the bid, which was 62 percent higher than its stock price at the time of the offer.
"They honestly believe that Yahoo is worth more," said American Technology Research analyst Donovan Gow. "A 60 percent-plus premium is probably the best they're going to do in this market." San Francisco-based Gow, who does not own shares in either company, advises investors to buy Microsoft stock.
Yahoo, based in Sunnyvale, Calif., fell 66 cents, or 2.33 percent, to close at $27.70 in Nasdaq Stock Market trading. Microsoft, of Redmond, Wash., was unchanged at $29.16.
Microsoft spokeswoman Dawn Beauparlant did not return phone calls. Yahoo spokeswoman Tracy Schmaler had no comment beyond the company's previous statements.
Microsoft, the world's biggest software company, made the $31-a-share offer Jan. 31. Yahoo rejected it Feb. 11, saying the price did not reflect its value. Microsoft's shares have fallen since the bid, now valuing the half-cash, half-stock proposal at about $29.36 a share, as the prospect of a better offer dimmed.
Combining with Yahoo would allow Microsoft to unite the second- and third-most-popular search engines in the United States. That would let them take on Google Inc., based in Mountain View, Calif., which gets more than half the Internet queries in the country.
Last month, Yahoo pointed to its No. 2 position in Web search, its operations in Asia, and the potential cost savings of the deal to show it was worth more than Microsoft offered. Yahoo said then that sales would climb at least 19 percent in each of the next two years and that growth would top analysts' predictions.
Since Microsoft's first advances, the U.S. economy has deteriorated, affecting the business of Internet companies, Ballmer said. Yahoo's and Microsoft's share of U.S. searches dropped in February from the previous month as more Web users chose Google, according to researcher ComScore Inc., of Reston, Va.
"Yahoo's hand looks increasingly less-attractive," Gamco Investors Inc. associate portfolio manager Larry Haverty told Bloomberg TV.
Still, Yahoo CEO Jerry Yang is sticking with his predictions.
"In contrast to your assertions about the effect of general economic conditions on our business, Yahoo's business forecasts are consistent with what we outlined in our last earnings call," Yang and chairman Roy Bostock said yesterday. "Your own statements have made clear the strategic importance of Yahoo's substantial assets and capabilities to Microsoft."
