Report: Microsoft “Re-evaluating” Yahoo Bid

Reuters is reporting that Microsoft may be reconsidering its bid for Yahoo in light of changed market conditions and signs of potential weakness in Yahoo’s “core business.” The article cites as sources the familiar unnamed “people familiar with the matter.” There are few details and nobody from either company comments.

While Yahoo has been publicly waiting for an improved bid from Microsoft, the latter has declined to boost its offer. The Reuters article argues the deteriorating economy may support Microsoft’s position: “The sources said the overall decline in the market has inflated the premium Microsoft is offering for Yahoo.”

If Microsoft does withdraw its offer in earnest — and this isn’t merely a negotiating tactic to force Yahoo back to the table — then the shareholder lawsuits on the Yahoo side will come fast and furious, you can bet.

Microsoft stock is up and Yahoo is down in after-hours trading. There’s more discussion at Techmeme.

Postscript: Microsoft CEO Steve Ballmer sent a letter to the Yahoo board, which was released Saturday morning. The letter reflects Ballmer’s frustration with Yahoo’s resistance and sets a deadline (three weeks) to respond or face a hostile proxy fight for control of the board (something Microsoft was preparing anyway). Below is the full text of Ballmer’s letter.

Dear Members of the Board:

It has now been more than two months since we made our proposal to acquire Yahoo! at a 62% premium to its closing price on January 31, 2008, the day prior to our announcement. Our goal in making such a generous offer was to create the basis for a speedy and ultimately friendly transaction. Despite this, the pace of the last two months has been anything but speedy.

While there has been some limited interaction between management of our two companies, there has been no meaningful negotiation to conclude an agreement. We understand that you have been meeting to consider and assess your alternatives, including alternative transactions with others in the industry, but we’ve seen no indication that you have authorized Yahoo! management to negotiate with Microsoft. This is despite the fact that our proposal is the only alternative put forward that offers your shareholders full and fair value for their shares, gives every shareholder a vote on the future of the company, and enhances choice for content creators, advertisers, and consumers.

During these two months of inactivity, the Internet has continued to march on, while the public equity markets and overall economic conditions have weakened considerably, both in general and for other Internet-focused companies in particular. At the same time, public indicators suggest that Yahoo!’s search and page view shares have declined. Finally, you have adopted new plans at the company that have made any change of control more costly.

By any fair measure, the large premium we offered in January is even more significant today. We believe that the majority of your shareholders share this assessment, even after reviewing your public disclosures relating to your future prospects.

Given these developments, we believe now is the time for our respective companies to authorize teams to sit down and negotiate a definitive agreement on a combination of our companies that will deliver superior value to our respective shareholders, creating a more efficient and competitive company that will provide greater value and service to our customers. If we have not concluded an agreement within the next three weeks, we will be compelled to take our case directly to your shareholders, including the initiation of a proxy contest to elect an alternative slate of directors for the Yahoo! board. The substantial premium reflected in our initial proposal anticipated a friendly transaction with you. If we are forced to take an offer directly to your shareholders, that action will have an undesirable impact on the value of your company from our perspective which will be reflected in the terms of our proposal.

It is unfortunate that by choosing not to enter into substantive negotiations with us, you have failed to give due consideration to a transaction that has tremendous benefits for Yahoo!’s shareholders and employees. We think it is critically important not to let this window of opportunity pass.

Sincerely yours,

Steven A. Ballmer Chief Executive Officer Microsoft Corporation

Related Topics: Channel: Industry | Microsoft & Yahoo Search Deal

Sponsored


About The Author: is a Contributing Editor at Search Engine Land. He writes a personal blog Screenwerk, about SoLoMo issues and connecting the dots between online and offline. He also posts at Internet2Go, which is focused on the mobile Internet. Follow him @gsterling.

Connect with the author via: Email | Twitter | Google+ | LinkedIn



SearchCap:

Get all the top search stories emailed daily!  

Share

Other ways to share:
 

Read before commenting! We welcome constructive comments and allow any that meet our common sense criteria. This means being respectful and polite to others. It means providing helpful information that contributes to a story or discussion. It means leaving links only that substantially add further to a discussion. Comments using foul language, being disrespectful to others or otherwise violating what we believe are common sense standards of discussion will be deleted. Comments may also be removed if they are posted from anonymous accounts. You can read more about our comments policy here.

Comments are closed.

Get Our News, Everywhere!

Daily Email:

Follow Search Engine Land on Twitter @sengineland Like Search Engine Land on Facebook Follow Search Engine Land on Google+ Get the Search Engine Land Feed Connect with Search Engine Land on LinkedIn Check out our Tumblr! See us on Pinterest

 
 

Click to watch SMX conference video

Join us at one of our SMX or MarTech events:

United States

Europe

Australia & China

Learn more about: SMX | MarTech


Free Daily Search News Recap!

SearchCap is a once-per-day newsletter update - sign up below and get the news delivered to you!

 


 

Search Engine Land Periodic Table of SEO Success Factors

Get Your Copy
Read The Full SEO Guide