Microsoft: Ok, So Now What?—And Is MSFT-YHOO Really Over?
So much for a sigh-of-relief rally. Microsoft (NSDQ: MSFT) shares are up an anemic $.20 today, less than one percent actually trading down a penny now. And check out Yahoo (NSDQ: YHOO), now trading near $24.50 per share (down just 14.5 percent) after opening sub-$23. Based on these movements, it’s almost as if the market doesn’t believe it’s over. In a note, Citi’s software analyst Brent Thill puts a 15 percent likelihood on what he calls the “7 percent solution”—the idea that at the midpoint of their demands, Microsoft and Yahoo were only 7 percent apart.
It’s just as possible that the companies are behaving as they are for totally different reasons. Yahoo could be up on the optimism for a Google (NSDQ: GOOG) ad deal, or some other arrangement. And Microsoft’s muted rise: fears that some other big bid is coming. As Rafat noted Saturday, Microsoft has $50 billion burning a hole in its pocket, so it could buy any number of companies: AOL (NYSE: TWX), Facebook, ‘New IAC’ (NSDQ: IACI), whoever. Problem is, these would all be second choices, having failed to grab the the prize it had its eye on. So Ballmer’s choices: buy a second-best asset, buy a lot of risky startups at nosebleed valuations, or leave $50 million in the bank earning nothing at today’s rates, while remaining substantially dependent on a core business that looks shakier today than it did last quarter. No wonder investors aren’t bidding up Microsoft harder.
Staci adds: I’ll toss in another option—use some of that money for some smaller acquisitions, talent raids and a huge development push. At the same time, focus on undoing the kludge of MSN, MSN Live, Windows Live and the rest, and create a coherent whole with a message that makes sense. It’s time to stop throwing spaghetti at the wall.
As for this all being over but the shouting, told ya that was wishful thinking.
Related StoriesPosted In: Money, M&A & Venture Capital, Mergers & Acquisitions, Companies, Microsoft, Yahoo
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Comments (1)
May 5, 2008 4:08 PM
OK, so how could MSFT spend that hot chunk of change in their ample back pockets?
hmmm - how about a billion dollar (that’s the one with nine noughts) signon bonus to each of the top 50 engineers (that own the patents) at Yahoo?
OK - bit too graphic? maybe a 100m million dollar sign up to the top 500 engineers…
still too over the top for you… (can you see where I’m going here?)
how about a million dollars for the best 50,000 engineers to sign on the MSFT dotted line. at a million dollars up-front each, i bet you could find a fair number of goog dudes who might wanna talk as well
or you could go with the april fool joke about paying every man woman and child in the world some money to not use the Goog search tool and apps for the next 3 years ...
any which way you cut it, this was a dumb deal and did the MSFT shareholders no favors. Yahoo investors—cut and RUN—MSFT guys will eventually do the math and put the egos behind them, and then there’s no-one left to help the (not so) big Y! out of the falling market share and lack of research strength space that they have put themselves into.