Mike offers a pretty good analysis of the current choice that Yahoo is facing. One thing that really represents the strategic blunder on the part of Yahoo’s Board is that they allowed a full week to pass without substantive comment or marketplace movement and that only reinforced the point that nobody outside of Microsoft wants this company. It is sad to say this, but that doesn’t make it any less true.
At this point Microsoft could lower their bid and still get this company. Not only does Yahoo have no leverage, as Mike points out, but they actually have a much weaker position than they did last week given the level of outsider investor control over the stock. If I were contemplating a shareholder lawsuit I would argue that the Board breached a number of duties that ultimately led not only to a loss of shareholder value through the operations of the company (which happens, let’s not go overboard) but more directly through their dysfunctional response this last week.
This is emblematic of Yahoo in recent years, despite having loads of cash they could never achieve focus and/or remake the company in a new image. Some would argue, and it’s a valid point, that they company didn’t need a makeover, what it needed was a shared sense of purpose that drove the majority of their business decisions. Who knows but those inside the company.
But before we pile on the criticisms we should look at the positives here. Yahoo’s brand is outstanding and the company has accomplished much this far, not the least of which is building a company worth $43 billion to Microsoft. Despite having the public optics of the Keystone Cops, the management team did deliver 10% operating margins and a 7% return on equity, as well as a very stable balance sheet, in a very competitive environment.
Lastly, what will be interesting to watch is whether or not Microsoft actually follows through on this bid.
Sources have indicated to us that Yahoo has scheduled a special board of directors meeting on Friday to determine, effectively, the fate of the company. After a week of hectic negotiating, it’s clear that no one is going to step in with a competing acquisition offer to what Microsoft put on the table last Friday – $31 per share. Softbank, the last real chance for a competing bid, bowed out today and said they would not be challenging the Microsoft offer.