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Alright, let’s face it, most of you readers online are going to be more tech-savvy and interested in technology news. As the big headline on every newspaper over the past few days said, “Microsoft offers USD$45 Billion for Yahoo.” The acquisition would be 50/50 cash and stock.
Does anyone think that this is terrible? Big bad Microsoft (MSFT) with their closed-source, resource-hogging monopoly operating system taking over a new Yahoo (YHOO) that has over the past few years renovated all their webpages to be Firefox complaint, helped promote free software, opened up their Yahoo! Mail, and more to compete with the likes of Google (GOOG).
Obviously, MSFT is doing this so that they can themselves compete with GOOG. To me, this merger/acquisition won’t work; YHOO has denied MSFT several times over the last couple years already and it probably won’t get regulatory approval, the market would be controlled by just MSFT and GOOG leading to the elimination of the “Big Three” (GOOG, YHOO, MSFT) and thus less competition.
GOOG has now said that they will help YHOO avoid a takeover attempt by MSFT, assuming they can even get regulatory approval. This itself raised eyebrows, especially MSFT’s since they want the deal to go through without obstacles in their way. MSFT noted this to the press and everyone is on their heels.
With this in mind, USD$45Bn is a lot of money; if the doesn’t go through, the half that is cash (USD$22Bn) is left over with no where to go. What can MSFT do if they can’t merge and they continue to sit on, literally, a ton of cash? Anyone remember a particularly big dividend in November 2004? A stock buyback program is probably better though (I’ll explain in a later post).
Key takeaways:
MSFT obviously sees a lot of value in YHOO. Whether or not they get to acquire YHOO, YHOO is still of substantial value, netting away synergies MSFT and YHOO could have had. If I was a trader, which I’m not and highly discourage, I would short YHOO over the short-term, hold it for the long-term, and not touch MSFT. A fan of MSFT should buy it because of potential large dividends or buybacks, but I don’t think MSFT is a sound company in the long-run (despite their monopolistic tendencies) and the long-run is really what matters most.
(Image CC-BY-SA TheAlieness GiselaGiardino²³.)
