Microsoft is offering $31 per share of Yahoo. YHOO is now trading at nearly $31, up from $19 at the close yesterday.
Why would anyone pay $31 for a share of Yahoo right now? There are two possible outcomes: 1) the deal goes through, and you get your $31 back either in Microsoft stock or cash. No net gain. 2) The deal doesn't go through and YHOO drops back to around $19, losing you about 30%.
Am I missing something?
It's merger arbitrage.
Buy YHOO, short MSFT. If the merger doesn't go through, then sure, your YHOO stock will drop, but your MSFT stock will gain.
If you get the right proportion of long/short YHOO/MSFT, you make money no matter what happens.
(Where the "right proportion" is really complicated to figure out, and is often wrong.)
(yet another outcome is that Yahoo twiddles it's thumbs and Microsoft rescinds the offer, but in that case you can look forward to getting in on a nice shareholder class-action lawsuit against the board)
This rumor is over a year old; it was also first floated around Q1 last year and YHOO's stock price surged that time too. I seriously thought Yahoo was going to sell that time but they didn't. Perhaps this time is different?
I'm confused...
The new company slogan will be "Microsoft. Period."
And "Flickr (a Microsoft brand)", etc.
He said this: A Microsoft deal is unlikely because (when he was there) all the Yahoos hated Microsoft. If an acquisition happens, it'd be hostile and the core guys will jump ship.
I nodded in agreement. But then this happens.
At the very least I'd be interested to see how Microsoft could integrate such a huge company properly. I had discussed the idea 6 months ago when the rumor began to surface, the big question (if it happens) is how the two cultures and systems would merge...I think it would take years before they would actually operate as one company.
But also, let's not kid ourselves, Microsoft could give two shits about Flickr. What they really want is Yahoo/Overture/Panama or whatever. That's the expected growth and cash cow that makes this deal possible.
Now that's a coincidence...
microsoft's bid on yahoo is a perfect illustration of why microsoft is doomed to failure.
how many startups could they fund with $45 billion? 100? 200? 1000? why exactly do they want to be at the helm of a slowly dying web portal left over from the first dot com boom?
i remember someone talking of microsoft and relating their situation to a victim in a horror film. we can all see the monster lurking behind them, slowly creeping in for the kill. when the sea change of personal computing really does come, whenever that may be, microsoft will not be there, they will be knee deep in shit, trying to claw themselves out of the hole that they've spent the last five years tirelessly digging.
So everyone who still holds any given stock thinks that the market price is too low.
Only true in a limited sense. For instance, a majority holding the stock up until today might have just thought that the market price was way too high for how the company is performing, but that the presence of one or more misguided, irrational, drowing-in-money, potential aquirers out there meant that there was a large chance they might get a large upside off one of the fools--turns out they were right =).
I was young... 6 maybe, so I thought wow yeah heh I'll take all the money.
Sure, MS have cash from their dying desktop, but they still can't build web apps, or compete with google online. I'd say yahoo are almost as bad.
Trying to claim that YHOO/MSFT is (technically) better than Google and that Google is just a bumbling idiot trying to hold down YHOO/MSFT via cheating and uncompetitive practices is a bit of a stretch, even for the seriously deluded among us.
The reason is because Google WAS the underdog. Yahoo and Microsoft were the established giants. After 5 years or so the situation has almost reversed, though, with Google making (and buying) the killer apps and the other two players stuck in a game of follow the leader.
In 2007, Microsoft's net income was: $14 Billion. Yahoo's net income was: $660 Million. Google's net income was: $3 Billion.
Uh, really?
Also, much of Google's "monopoly" comes from a source that is heavily protected by law: the pagerank patent. Patents are government granted monopolies with limited time; as such, there is little or no legal recourse as any mildly abusive behaviour is expected, tolerated, and what the system was designed to provide.
I think the combined search powers could be really good.
take a look at the annual data. they may be profitable, but a 62% fall in net income over 3 years, that's pretty bad.
Yahoo's problem seems to be the management and the fact they are still playing catch up with adsense.
1. Find something Yahoo currently does well (e.g. flickr)
2. Make a clone of it.
3. Wait for Microsoft to ruin the original.
Heck you could SAY that it "replaces" Microsoft Flickr, and that would be perfectly valid !
I think it is indeed a happy day for startups.
And I think this buy is more about strengthening Microsoft's online presence, not their desktop apps.
"Microsoft is desperate to grab a bigger share of the online-advertising market because many of its software products are being challenged by free, advertising-supported services offered by Google. The company is also worried that Google's dominance in search and advertising allows it to dictate terms to advertisers, and gives it an unfair advantage over its smaller rivals."
Server tech would be a concern, but who knows - perhaps rather than switching everything to Windows servers, Microsoft might take the chance to become acquainted with Linux and BSD. It would make sense if MS would in the future simply release a theme for Gnome, rather than waste resources on another OS that nobody wants.
