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February 11 2008

Yahoo Rejects Microsoft Offer, Microsoft Hints At Hostility

Microsoft-YahooWow… this could get ugly, and fast.

Yahoo has officially rejected the offer from Microsoft.

“After careful evaluation, the Board believes that Microsoft’s proposal substantially undervalues Yahoo! including our global brand, large worldwide audience, significant recent investments in advertising platforms and future growth prospects, free cash flow and earnings potential, as well as our substantial unconsolidated investments. The Board of Directors is continually evaluating all of its strategic options in the context of the rapidly evolving industry environment and we remain committed to pursuing initiatives that maximize value for all stockholders.”

Excuse me? Microsoft undervalued Yahoo? THEY OFFERED A 62% PREMIUM ABOVE THE CLOSING PRICE! If any one has “undervalued” Yahoo, it’s the stock market, not Microsoft. I still don’t see the point to this merger, personally, but it’s obvious that Microsoft wants them, and the maker of Windows said some fairly ominous things in their reply.

“It is unfortunate that Yahoo! has not embraced our full and fair proposal to combine our companies. Based on conversations with stakeholders of both companies, we are confident that moving forward promptly to consummate a transaction is in the best interests of all parties.

We are offering shareholders superior value and the opportunity to participate in the upside of the combined company. The combination also offers an increasingly exciting set of solutions for consumers, publishers and advertisers while becoming better positioned to compete in the online services market.

A Microsoft-Yahoo! combination will create a more effective company that would provide greater value and service to our customers. Furthermore, the combination will create a more competitive marketplace by establishing a compelling number two competitor for Internet search and online advertising.

The Yahoo! response does not change our belief in the strategic and financial merits of our proposal. As we have said previously, Microsoft reserves the right to pursue all necessary steps to ensure that Yahoo!’s shareholders are provided with the opportunity to realize the value inherent in our proposal.”

I think it’s pretty obvious that Microsoft is going to go after Yahoo in any way they can. Why they really want them seems to still be a mystery, but it looks like there is no way they’re giving up until Microhoo! comes to be.



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