Microsoft Tightens the Thumbscrews
With its resounding destruction of the ISO complete, Evil Incorporated has turned its attention back to Yahoo, and redoubled its efforts to assimilate the search outfit. As always, Linux Journal Breaking News is here with coverage, analysis, and a bit of snarky commentary on the situation.
Microsoft CEO Steve Ballmer — in full Dr. Evil mode, and with all the credibility of the same — delivered Big Evil's ultimatum yesterday, promising the already-expected proxy battle if Yahoo doesn't surrender within three weeks, even going as far as threatening to cut the offering price. The announcement is a bold one, considering that rumors going around Wall Street have it that Microsoft can't find anyone willing to be on the takeover board.
Perhaps bolder is the threat to lower the buying price, as a bit of second-grade arithmetic shows the deal has lost most of its value in the last two months. The deal is generally reported as being worth $44 billion, a 60% premium on Yahoo's stock price. However, that's far from the current reality: Yahoo's stock price has risen approximately 47% since the offer was made, while Microsoft's has dropped around 9%. Yahoo shares closed at $19.18 on January 31 — the day before the offer, cited by Microsoft as the basis for it's pricing — while Microsoft shares were at $32.60. On Friday, Yahoo shares closed at $28.36, while Microsoft was down to $29.16.¹
Now, we're not market analysts, but in a deal that involves 50% Microsoft stock, the overall effect is that Microsoft's 60% premium is now somewhere around 10%. That's not exactly a huge incentive for Yahoo shareholders, especially the ones who'll get stuck with piles of slowly-sliding Microsoft shares. As it stands, a three-point gain would wipe out the premium entirely, so it's hardly the time to be threatening cuts.
"During these two months of inactivity, the Internet has continued to march on, while the public equity markets and overall economic conditions have weakened considerably" reads Ballmer's letter. "By any fair measure, the large premium we offered in January is even more significant today." Considering the above, it seems a strange statement from a man with a mathematics degree from Harvard; must be the New Math at work.
For now, we're all anxious spectators, consigned to gasp in horror at the Apache dance playing out before us.
¹Source: Google Finance, as of April 5, 2008.