Yahoo Says No
According to news stories [tag]Yahoo[/tag] will reject [tag]Microsoft[/tag]‘s takeover bid. This isn’t too surprising. As we pointed out here last week, despite the media’s focus on the premium of the offer relative to the previous day’s closing price, the offer represented a very small premium to the year ago price or even the end of 2007 price. Some outlets are reporting the Microsoft might be willing to go to $35 a share. That might still be too low. The really interesting reports suggest that [tag]Google[/tag] has offered to help Yahoo to keep them from saying yes. No word on what that help might look like. My best guess would be joint projects to share [tag]Yahoo Widgets[/tag] and [tag]Google Apps[/tag] on each other’s sites.
The irony to all of this is that while it is true that Google is eating Yahoo’s lunch when it comes to being the Number 1 search engine, Yahoo is still Number 2. Keep in mind there is a lot of money to be made at Number 2, and Yahoo hasn’t even tried the whole cost cutting and layoffs thing yet. There is plenty of profit in the company and Yahoo knows it.
Your Move?
Well it comes down to how much you believe the higher offer reports. If Microsoft comes back with a $35 dollar offer, there is more up side here. If not, look for the stock price to drift back down. So what should you do? Ask yourself the risk question. Are you willing to be very risky for a potentially high return? If yes, consider holding on to see if the bigger offer comes. A $4 a share bump is a 10% gain in very short period of time. If not, get out now. There might not be time to get out after people realize the bigger offer isn’t coming, and frankly nobody knows what the inner workings are at Yahoo or Microsoft right now, so you are looking at 50/50 at best.
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