Yahoo still open to Microsoft talks

 

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Posted on 6 May 2008 at 09:35

Yahoo chief Jerry Yang says he has "mixed feelings" over Microsoft's decision to walk away from its takeover bid, and had been seeking common ground with the company when it abruptly ended deal talks.

In the wake of the news Yahoo's investors showed their disappointment over the break-up of negotiations by sending shares down 15%.

"We were negotiating a way to find common ground and then on Saturday they chose to walk away," says the 39-year-old co-founder of the pioneering internet company. "They started it and they walked away. If they have anything new to say, we would be open... I am more than willing to listen."

Negotiations

After three months of negotiations, Microsoft CEO Steve Ballmer raised his offer for Yahoo to $33 per share from an initial $31, for a total deal value of about £24 billion.

Yang held out for $37 per share, saying that even the sweetened offer did not value Yahoo properly for its web search advertising technology, its prominence in selling display ads and its lucrative overseas holdings.

But its two largest shareholders independently told The New York Times they would have sold for as little as $34.

"I am extremely angry at Jerry Yang and at the so-called independent board," Gordon Crawford, portfolio manager for Capital Research Global Investors, the largest Yahoo shareholder with some 16% of stock, told the newspaper.

Some analysts say Yahoo shares, which dropped $4.30 to end at $24.37 on Monday, could have fallen 30% to closer to $19.18, its price before Microsoft made its bid public on 1 February. But the descent was cushioned by investors who are betting Microsoft will eventually come back to the table.

"This is going to play out over the next several months and there is still a chance Microsoft will buy the company for somewhere around $33 a share," says Todd Dagres, general partner at venture capital fund Spark Capital.

Other options

Yahoo is likely to press alternative strategies in coming weeks, including a search advertising partnership with Google and a deal for Time Warner's AOL internet unit.

A Google deal would boost Yahoo's operating performance in the near term, but runs the risk of regulatory scrutiny over an alliance between the internet's top two players.

Google and Yahoo are hammering out the intricacies of a potential deal and also are sharing their plans with antitrust regulators, says a person close to Google who was not authorised to speak publicly on the matter.

In a letter to Yang over the weekend, Ballmer warned that any deal between Yahoo and Google would be difficult to unravel and would preclude an agreement with Microsoft.

Yang says the company will take care to structure any new efforts to "preserve as much (as possible) long-term flexibility for Yahoo, both operationally and strategically."

Analysts expect a flurry of shareholder lawsuits against Yahoo, and say it may even face direct pressure on its board.

Already, some Yahoo shareholders have started to question how talks were handled.

Yang, who owns about 4% of the company, is expected to hold a meeting with employees today in an effort to reassure staff in the wake of the Microsoft talks ending.

"No one is celebrating about the outcome of these past three months ... and no one should. We live and work in a competitive world and the web is only going to get more competitive. Executing on our strategic plan is what matters most," says Yang in a post on the company's blog.

Author: Reuters