William Eng
May 25th, 2008, 11:34 AM
On Friday, Ballmer of Microsoft made some comments about the failed buy-out of Yahoo. Microsoft initiated the buy-out offer about two months ago. Microsoft offered $33 per share (for a total buy-out at $47.5 billion), and Yahoo countered with $37 a share, and Microsoft backed away from any buy-out scenario. Instead, Microsoft countered with an offer that basically would gut Yahoo.
Clever manager that Ballmer. The counter Ballmer made was to buy Yahoo's search business and take a MINORITY stake in Yahoo. Also, Microsoft wants Yahoo to divest itself of it's internet operations outside of the United States. Collins Stewart analyst, Sandeep Aggarwal, figures that Yahoo's search operation is worth $21 billion, display advertising to be worth $14 billion and it's international holdings at $9.25 billion, for grand total of $44.25 billion.
But why would Microsoft want Yahoo to unload their international internet operations? Reading between the lines, and analyzing the "counter offer" by Microsoft, we do indeed see how clever Ballmer is.
If Yahoo takes the counter offer, Ballmer in one fell swoop would have eliminated a potential competitor. Microsoft would have gotten it's prize, the search component of Yahoo, without paying for anything else. The intenational internet operations for Yahoo represents a threat to Microsoft's expansion, particularly in the far east, where the international internet operation is focused. With Yahoo unloading that component, Microsoft would be free, literally unimpeded, in it's quest for dominance in the far east.
Microsoft would have achieved it's goal of becoming the number two internet search engine by only paying $21 billion per analyst Aggarwal's reckoning, instead of it's offered last bid of $47.5 billion, a savings of $26.5 billion. And still have achieved it's goal of eliminating Yahoo and becoming a viable threat to Google.
The Microsoft failed bid exposed a lot of things. In one manner it exposed the cleverness, and ruthlessness, of Ballmer. It also exposed the naivete of Yahoo CEO, Yang. Yang bluffed and lost. Ballmer pulled out a royal flush, an unbeatable combination.
Yang, in Yahoo's desperation, threatens to throw itself at the feet of Google's mercy. Yang will work with Google in placing Google's ads on Yahoo's pages. Now that Microsoft doesn't want Yahoo at Yang's price, nor any price for that matter, there should be no need for Yahoo to work with Google. Going into the camp of the enemy and offering the enemy your head on a silver platter is not a way to win the war, nor even a minor battle.
Yahoo does have one ace up it's sleeve. And it was highlighted by Microsoft: Yahoo's far east internet operation. That card can be played, and played very well, if Yahoo knows how to do it. It's time for Yahoo to stop fooling around, bring back it's troops, and amass for expansion in the far east.
P.S. Ignore Icahn's interests for now. Icahn can always be bought for a price.
Clever manager that Ballmer. The counter Ballmer made was to buy Yahoo's search business and take a MINORITY stake in Yahoo. Also, Microsoft wants Yahoo to divest itself of it's internet operations outside of the United States. Collins Stewart analyst, Sandeep Aggarwal, figures that Yahoo's search operation is worth $21 billion, display advertising to be worth $14 billion and it's international holdings at $9.25 billion, for grand total of $44.25 billion.
But why would Microsoft want Yahoo to unload their international internet operations? Reading between the lines, and analyzing the "counter offer" by Microsoft, we do indeed see how clever Ballmer is.
If Yahoo takes the counter offer, Ballmer in one fell swoop would have eliminated a potential competitor. Microsoft would have gotten it's prize, the search component of Yahoo, without paying for anything else. The intenational internet operations for Yahoo represents a threat to Microsoft's expansion, particularly in the far east, where the international internet operation is focused. With Yahoo unloading that component, Microsoft would be free, literally unimpeded, in it's quest for dominance in the far east.
Microsoft would have achieved it's goal of becoming the number two internet search engine by only paying $21 billion per analyst Aggarwal's reckoning, instead of it's offered last bid of $47.5 billion, a savings of $26.5 billion. And still have achieved it's goal of eliminating Yahoo and becoming a viable threat to Google.
The Microsoft failed bid exposed a lot of things. In one manner it exposed the cleverness, and ruthlessness, of Ballmer. It also exposed the naivete of Yahoo CEO, Yang. Yang bluffed and lost. Ballmer pulled out a royal flush, an unbeatable combination.
Yang, in Yahoo's desperation, threatens to throw itself at the feet of Google's mercy. Yang will work with Google in placing Google's ads on Yahoo's pages. Now that Microsoft doesn't want Yahoo at Yang's price, nor any price for that matter, there should be no need for Yahoo to work with Google. Going into the camp of the enemy and offering the enemy your head on a silver platter is not a way to win the war, nor even a minor battle.
Yahoo does have one ace up it's sleeve. And it was highlighted by Microsoft: Yahoo's far east internet operation. That card can be played, and played very well, if Yahoo knows how to do it. It's time for Yahoo to stop fooling around, bring back it's troops, and amass for expansion in the far east.
P.S. Ignore Icahn's interests for now. Icahn can always be bought for a price.