Wall Street Journal reported that Microsoft made another presentation of its vision for the combined entity to Yahoo executives on March 10. It is over a month now that Microsoft made its unsolicited bid to acquire Yahoo. Since then, the price has dropped (since Microsoft shares have been trading mostly lower); Yahoo has postponed the date to nominate Board members; and more importantly, no other plausible suitors have emerged. Rupert Murdoch said: “We’re not going to get into a fight with Microsoft, which has a lot more money than us.” So, there goes one serious alternative that Yahoo might have possessed.
Market Watch reported that: Unless Yahoo management has an alternative plan or is expecting stellar results, either of which we see as a remote possibility, this strategy opens up a risk that Microsoft could withdraw its bid and reinstate it later at a lower price," analyst Jeffrey Lindsay of Bernstein Research.... Bernstein added, however, that he expects Yahoo to report "another mediocre quarter."
If Yahoo played its cards wrong, it could end up getting a lower value. Then, Yahoo shareholders will be really displeased. Yahoo managers may get de-motivated and the combined entity (which relies mostly on the creative ability of its people--whose compensation may be tied to the upside of Microsoft stock!) may not have the collective capability to develop a coordinated strategy to fight Google (which incidentally is a step closer to acquiring DoubleClick).
One month may not be a longtime for negotiations to combine physical assets but is an eternity when striving to pool knowledge assets to compete against a formidable leader such as Google. Yahoo may lose talent and so could Microsoft.
Yahoo should now declare that Microsoft's offer is fair, open its books in good faith. Then, explore if it can get a higher price by showing Microsoft its hidden jewels. I believe that if Microsoft were to up-end its offer, it will be because Yahoo has under-leveraged hidden assets that it could not value from the outside and not because there are competitive offers that top Microsoft's offer of about $41 Billion.
Yahoo--Make up your mind. Delay only weakens you and the combined entity.
How strong will Yang & Co. be after the results of Q1 2008 are declared? Will they still claim that Microsoft undervalued its assets? I doubt it.