Microsoft Willing To Raise Bid, But How Much Is Enough?

Apr 30, 2008 at 6:25pm ET by Greg Sterling

The Wall Street Journal is reporting that Microsoft’s directors are collectively willing to authorize the company to raise its bid for Yahoo to up to $33 per share but perhaps not to the levels that Yahoo has signaled it wants to be acquired.

If such a sweetened bid did occur it would put further pressure on Yahoo to negotiate and make it harder for the company to argue that it was being significantly undervalued.

According to the WSJ:

Microsoft has said privately in recent days that it’s willing to offer as much as $32 or $33 a share, well above the $29.12-a-share value of its original cash-and-stock offer as of Tuesday’s market close, these people say. But major Yahoo shareholders have signaled they want in the range of $35 to $37 a share, with Yahoo’s management and board similarly shooting for an offer in the upper $30s, they add.

Here’s another interesting bit on Google’s role as potential spoiler:

People familiar with the matter say the success of a Yahoo test to carry search advertising from Google Inc. has played a key role in emboldening some at Yahoo in their continued resistance to Microsoft’s overtures. The people say a broader pact along those lines, which could significantly boost Yahoo’s cash flow, could possibly be announced within the next week. But antitrust experts say any broader search-ad deal would likely attract intense scrutiny from regulators, given Google’s and Yahoo’s large shares of the Web search and online ad markets.

However, Google has expressed confidence that regulators wouldn’t block such a deal because the Mountain View company sees it as legally analogous to existing deals with AOL and IAC.

Greg Sterling is a Contributing Editor at Search Engine Land, and writes a personal blog Screenwerk, examining the broader world of media and advertising. He also posts at a Local Mobile Search, which is focused on the mobile Internet.

See more articles by Greg Sterling >

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