Washington — Microsoft Corp., the software maker that withdrew its $47.5 billion offer to buy Yahoo! Inc., announced Sunday afternoon it has issued another proposal to the Internet Company that would not involve a new takeover bid, but said it may still consider a full acquisition.
The announcement comes just days after billionaire corporate raider Carl Icahn this week accused the board of Yahoo of having “completely stalled” the merger talks, saying he was accumulating Yahoo stock to oust the current board of directors at the Internet search pioneer’s upcoming July 3 annual shareholders meeting.
Icahn, a hefty Yahoo stakeholder, launched a proxy campaign against Yahoo’s board, meant to pressure the search company to resume talks with Microsoft, after the software giant withdrew its unsolicited buyout bid of $33 a share on May 3.
“In view of current developments since Microsoft pulled back its proposal to acquire Yahoo Inc., Microsoft announced that it is continuing to explore and pursue its alternatives to improve and expand its online services and advertising business,” a statement posted on its website said.
Yesterday, Microsoft said that taking into consideration it has brought up with Yahoo another option that would involve a transaction with Yahoo but not an acquisition of all of Yahoo.
“Microsoft is not offering to make a renewed bid to acquire all of Yahoo at this time, but reserves the right to reconsider that alternative depending on future developments and discussions,” Redmond, Washington-based Microsoft said today in a statement.
Should Microsoft’s renewed offer be accepted by Yahoo!, it could help the internet company to avoid a damaging proxy fight with Icahn.
“Microsoft sought to unite its online assets with Yahoo’s worldwide offerings to gain ground on undisputed online advertising juggernaut Google.”
“What Microsoft is mostly occupied with is getting that Yahoo subscriber base,” said Brendan Barnicle, an analyst at Pacific Crest Securities in Portland, Oregon. Microsoft may have realized that it would face challenges in integrating the whole of Yahoo, he said.
Microsoft’s announcement indicates that the companies may still work together after Microsoft walked away from acquisition talks on May 3.
Microsoft, the world’s biggest software producer, tired wooing Yahoo for three months to expand its Internet-search business and compete with Google Inc. in the $41 billion worldwide online advertising market.
The software company had offered to pay $33 a share for Yahoo!, an assessment which represented a 72 per cent premium to the share price at the end of January, just before its initial approach was made public.
“Jerry Yang, the co-founder and chief executive of Yahoo!, had abandoned that offer asserted that the price was too low.”
“It does signal some movement, receptivity at Microsoft to doing something,” said Carl Tobias, a professor at the University Of Richmond School Of Law in Richmond, Virginia.
The agreement Microsoft and Yahoo are addressing involves Yahoo carrying search advertisements from Microsoft, the Wall Street Journal said today, citing people familiar with the matter. That may be a way for Microsoft to scuttle talks between Yahoo and Google for a similar partnership, the newspaper said.
Yahoo’s chairman, Roy Bostock, and chief executive, Jerry Yang, are under severe pressure from shareholders who are unconvinced by the company’s go-it-alone approach and are despondent at Yahoo’s weak stock price. Last week, Icahn put forward ten dissident nominees to unseat Yahoo’s board.
Yahoo’s internet advertising business is powered by an expensive new technology platform called Panama, introduced last year. One alternative for Microsoft would be to acquire Yahoo’s advertising division, or another option could be the formation of a new entity combining both Microsoft and Yahoo’s advertising assets.
Sir Martin Sorrell, chief executive of the advertising group WPP, last week said it was “a shame” that Microsoft was unsuccessful to buy Yahoo, suggesting a powerful competitor to Google would create a more “balanced market” in on-line search.
If Microsoft and Yahoo make an agreement to slice and dice the Internet search pioneer, Microsoft would most likely be interested in Yahoo’s search and advertising offerings; given that is where the Redmond giant has struggled to take the lead.
In discussing the software giant’s statement regarding Yahoo and its future plans, Kevin Johnson, Windows and Windows Live chief, said Sunday in a letter to employees:
“Irrespective of the result of any new discussions, it is essential that we continue to move forward to strengthen our online services business. The fact is that we are not where we want to be in this business yet and we have been in this position longer than we would all like. To that end, we will be accelerating elements of our core strategy, and breaking ground in new areas.”
“However, if Yahoo does not turn up with a deal of some sort, it risks facing a potentially brutal and damaging showdown with its own investors at its annual meeting in California in early July.”