I try to avoid blogosphere discussions unless I have something substantial to add. I don't have holdings in any of the companies embroiled in the current takeover / acquisition debate, and to be perfectly honest I am not sure if any of the combined entities that eventually emerge will be able to compete with Google on their home turf.
I am however an interested observer, and I have a number of questions buzzing around in my head that remain unanswered.
This is more a collection of "what ifs" than anything else, discussion points that have no real factual basis, from someone with very minimal knowledge of how the financial markets work.
Microsoft Should Only Increase Cash Offering
Yahoos seem to want $40+ per share, which would effectively value the stock at close to a 7 year high. If Microsoft stock was similarly valued based upon their own 7 year high (which wasn't over 2 years ago), then the original equivalent of $31 per share in stock would be very attractive.
Most of Yahoo's investors are institutional, possibly long term investors, who also have holdings in Microsoft, Google and Time Warner.
For me the strong play from Microsoft would be to offer $35 per share cash, or keep the existing $31 stock equivalent based on valuations the day it was made public.
Have some kind of firm "either/or" clause, and some additional guarantees based on stock performance for those that choose the stock.
My gut feeling is that many of the institutions want some kind of deal, there just has to be a viable alternative for those Yahoo investors who still regard Microsoft as the big Satan.
An increase in the cash offer, and a slight rewording of what is on offer could well reduce the amount of cash that Microsoft have to fork out rather than increase it.
Yahoo - AOL
It is funny, a Yahoo <> AOL deal would essentially create a monopoly situation in Email and Instant Messaging worse than a Yahoo <> Microsoft deal, so I am sure we can expect another post on the Google blog objecting to such a merger.
The synergies between Yahoo & AOL are such that the sum of the individual parts would be greater than the whole, thus a merger would be a defensive move rather than one that would stimulate the kind of potential growth Jerry Yang is predicting.
Microsoft To Buy Google?
This is never going to happen, but just to compare notes
- It would create the best shareholder value
- It wouldn't create any new monopolies in a specific vertical
- They are polar opposites, but the combined company would have so many synergies, it would be frightening
Put Larry and Sergey in charge of the combined entity, open source not only all Microsoft products, but also all Google's. In some way get rid of software patents.
The crux? Back to the old browser wars - competitors to Internet Explorer rely on Google for financing.
Previous $35 Bid?
Even if Microsoft previously bid $35, that was based upon their own stock price at the time of the bid, which was above $34 per share.
Poison Pill or Suicide Pill or Sandbagging
I know so much about investment, I had to look up all the terms, browsing around on Investopedia
Ultimately I know that I currently use Yahoo and Microsoft online services so rarely, both must be doing a lot wrong.
You are never going to get a deal where the synergies are as compelling, but equally as impossible as a Microsoft <> Google merger, so you have to look for second best.
Google have an unhealthy share of my online attention, thus I would like an alternative. I am not sure forcing Microsoft to pay more is good for the long-term future of a combined company.
What I don't appreciate is poor reporting - I can see in the numbers that Microsoft isn't actually offering less than it did previously as far as a stock deal, and this is more to do with timing with Yahoo's Annual General Meeting than Microsoft taking advantage of a drop in share price that has affected all major stakeholders in the sector.
A Quagmire Of Ineptitude?
My brain is the one which is bogged down in thoughts about things I really shouldn't be thinking about, thus writing something hopefully will clear the mind and I can get on with something constructive. Maybe others will do the same or at least improve the quality of their reporting so I don't have to think too much.
Microsoft <> Yahoo doesn't seem like a perfect deal, but I can't see another deal stimulating enough growth to offer Google any competition.
Update
It looks like Microsoft have responded to being given the cold shoulder - I suppose it adds a little insult to injury that Microsoft press releases seem to always appear on Yahoo news first, and that is the source that often appears on Techmeme.
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