“Despite common belief that it would dig deeper into its pockets if necessary to land Yahoo deal, the Redmond Vole has no plans to sweeten its offer for the Web portal,” according to published reports.
San Francisco — It has been nearly two months into Microsoft’s wooing of Yahoo!, the duo are no closer to a union of souls — yet not further apart, either. The Redmond cavalier appears ready for a long, slow romance that will eventually end exactly as the company intended it all along; Yahoo! knows its own worth, and will not settle for any less.
Microsoft reportedly is not planning to boost its bid for Yahoo Inc., ever since it made a $44.6 billion offer to buy the Internet Company, at least until the Internet-search firm agrees to buyout talks, The Wall Street Journal reported Tuesday, citing unnamed sources close to the company.
“The sources asked for anonymity as they are not allowed to speak on behalf of the company.”
The software giant believes time is on its side, though Microsoft is still expected to raise its bid at the eleventh hour, when the companies are already deep in negotiation, but there is no reason to do it before then, the newspaper reported, an approach intended to open a dialogue that has yet to occur.
So far, Microsoft and Yahoo executives have met once to discuss the software company’s original proposal of $44.6 billion, which Microsoft made its $31-a-share on January 31, other sources told Reuters. The value of the cash-and-stock offer has since fallen to about $42 billion amid a decline in Microsoft’s shares.
Yahoo apparently wants closer to $40 a share, but many Wall Street analysts think an offer that puts the firm at roughly $35 a share could seal the deal.
A blended $40 offer with a $31 per share cash portion would require that Microsoft was priced at $49, nearly twice the $29.15 share price we see today. Good luck with that strategy, because Microsoft has not seen prices like that since the days of Windows ME and Office 2000.
However, the two sides only met once, the discussion did not focus on deal terms and were instead meant to give Microsoft a chance to assure Yahoo of its future plans for the combined entity.
“There is no reason to bid against ourselves,” one of people familiar with the deal informed The Journal. Microsoft’s bid was initially worth $44.6 billion, however, a decline in Microsoft’s shares means the offer is currently about $42 billion.
As yet, Yahoo has failed to attract an alternative bidder or other viable alternative and to persuade many of its own investors that the company is worth more, while the deteriorating U.S. economy makes the original bid look even more attractive, Microsoft insiders were quoted as saying.
Microsoft considers that Yahoo’s own shareholders will ultimately demand for the company to agree to the offer. To date, however, despite some early calls in favor of the sale, shareholders have remained largely silent.
“Yahoo shareholders have been pretty patient on the whole, and Microsoft is probably hoping they will now tell Yahoo to get on with it,” former Wall Street Internet analyst Henry Blodget wrote in his Silicon Alley Insider blog.
Yahoo shares declined more than 2% Tuesday morning, whereas Microsoft’s stock went up more than 2%.
Analyst Robert Breza of RBC Capital Markets said Microsoft’s reported resolution to stay firm on its current offer is not surprising.
“From their point of view, there is no compelling reason to raise their bid,” he said. “With no other competitive bidder and with Microsoft taking a longer-term view and not trying to rush things, there really is no compelling reason to raise it.”
“Each day that passes away is another day before the deal closes and the combined company gets down to business.”
The existing offer can not hang over Yahoo like a sword of Damocles forever. If Microsoft does not look sincere in its pursuit of the fleeing doe, it would be easy to imagine that it only wanted to disrupt Yahoo’s regular business with this distraction, with no intention to actually buy.
Though the acquisition would give Microsoft a gigantic boost in the display advertising space and enable it to grow that segment of the online marketing business in due course, Microsoft may determine that at least one more piece is needed to complete its online puzzle, such as the acquisition of a social networking platform.
Neither Yahoo nor Microsoft responded to requests for comment on the reports. Yahoo has continually held that it does not feel the presented offer is in the company’s best interest and has actively explored strategic alternatives.