REAL LIFE APPLICATION - Yahoo and Microsoft

[Vandana]

Ok, let's start applying our knowledge. As you all know from reading the papers that Microsoft is bidding for Yahoo.

Let me ask you a few questions...

1) Why is Microsoft bidding for Yahoo?
2) Some analysts are saying the Microsoft is bidding too low and needs to increase their price per share. Why is this the case? Does that mean Yahoo is undervalued? Why could that happen?
3) Why is Google concerned?

I want you to use your knowledge from all your ACCA papers and come up with some answers...

Are you ready to rise to the challenge?

[Asif]

here is the answer :

1) For Google, because Google is a threat for them. google got better search engine and others things to beat them they need more user group and knowledge.

2) low price because they are trying to find if google also bid yahoo or not

3) They dont want to be out of the market

write or wrong ?

[PRiYO]

Google is becoming more stronger and stronger. And yahoo suffering from share fall and liquidity crisis. Microsoft allready bid once before in 2006.
but yahoo didnt accepted. Now yahoo CEO resigned because they are in loss every espect with google took over major claints. While google open 3 new brand. You tube, google mail, and orkut which was great success.

In other hand microsoft started its live campaign in 2006. and facing difficulties again googles sky high demand. so they are tring to acuire yahoo and make it toughter for google, make stronger compitition and balance the market. Also yahoo been in the web market for a longer time so their experties and experience will be very good to compete with google

[Vandana]

some good points by both of you but we won't comment until a few more GTGers have put their comments up!

Watch this space!

[Acid]

Ok, let's start applying our knowledge. As you all know from reading the papers that Microsoft is bidding for Yahoo.

Let me ask you a few questions...

1) Why is Microsoft bidding for Yahoo?
2) Some analysts are saying the Microsoft is bidding too low and needs to increase their price per share. Why is this the case? Does that mean Yahoo is undervalued? Why could that happen?
3) Why is Google concerned?

I want you to use your knowledge from all your ACCA papers and come up with some answers...

Are you ready to rise to the challenge?


Hi,

- Microsoft is bidding for Yahoo because the current market is not very lucrative for Microsoft with Google being the top revenue earner and with its fantastic AD coverage , Yahoo and Microsoft cant just competite. Yahoo and Microsoft together earns less revenue then Google alone.

The current stats showed that Yahoo is getting more popular owing to its new services and inluding yahoo mash and a better email function along with its Search engine which is attracting more adverts. Microsoft thought that by combining its own and Yahoo expertise it can competite with Googles search engine..

- Microsoft ofcourse undervalued the Yahoo shares because it knew that immediately after it bids for yahoo , yahoo shares would go up and MS also knew the consequences of reactions from Google. MS very well knew that If he bids a lower price , yahoo would ask for an increased price. So more in low adds up to low but an add in a higher bid would make the price go even higher! So its like demand-supply thing.

- Google isnt really worried but concerned ofcourse as the merging could mean a greater monopoly between the internet top search engines and websites. So its always good to keep an eye on your foe .Because If Microsoft and Yahoo can both bring in there expertise together , they can reach a wider audience and that would mean a future loss for Googles revenue.


These are all the reasons I can put at the moment while there are many more which can be talked about.


Regards

Acid

[shameerah]

Hi guys,

No1 :
I think that Microsoft wants to take another step up the ladder of best search engines, and since Yahoo is also a competitive search engine, the only way to get there is the merger Microsoft-Yahoo. Anyway Google is the best, bearing the lowest search times and coming up with the most relevant web pages as well. In any case, the future 'Microsoft-Yahoo' would have to review their algorithm(to decrease their search times) and come up with some more innovative ideas to close the gap between them and Google. Google has got the BEST programmers working for them, and I'm sure they are going to come up with more ideas to ensure no one unseats them from their position at the top...

;-) Got to go, I'll think about question No2 and No3, thanks Vandana for all your hard work.

[Acid]

I would pefer the name "GTGians" rather then GTGers ... what do u think?

[Acid]

SAN FRANCISCO - Yahoo Inc.'s board will reject Microsoft Corp.'s $44.6 billion takeover bid after concluding the unsolicited offer undervalues the slumping Internet pioneer, a person familiar with the situation said Saturday.


The decision could provoke a showdown between two of the world's most prominent technology companies with Internet search leader Google Inc. looming in the background. Leery of Microsoft expanding its turf on the Internet, Google already has offered to help Yahoo avert a takeover and urged antitrust regulators to take a hard look at the proposed deal.
If the world's largest software maker wants Yahoo badly enough, Microsoft could try to override Yahoo's board by taking its offer — originally valued at $31 per share — directly to the shareholders. Pursuing that risky route probably will require Microsoft to attempt to oust Yahoo's current 10-member board.
Alternatively, Microsoft could sweeten its bid. Many analysts believe Microsoft is prepared to offer as much as $35 per share for Yahoo, which still boasts one of the Internet's largest audiences and most powerful advertising vehicles despite a prolonged slump that has hammered its stock.
Yahoo's board reached the decision after exploring a wide variety of alternatives during the past week, according to the person who spoke to The Associated Press. The person didn't want to be identified because the reasons for Yahoo's rebuff won't be officially spelled out until Monday morning.
Microsoft and Yahoo declined to comment Saturday on the decision, first reported by The Wall Street Journal on its Web site.
Yahoo's board concluded Microsoft's offer is inadequate even though the company couldn't find any other potential bidders willing to offer a higher price.
Without other suitors on the horizon, Yahoo has had little choice but to turn a cold shoulder toward Microsoft if the board hopes to fulfill its responsibility to fetch the highest price possible for the company, said technology investment banker Ken Marlin.
"You would expect Yahoo's board to reject Microsoft at first," Marlin said. "If they didn't, they would be accused of malfeasance."
But by spurning Microsoft, Yahoo risks further alienating shareholders already upset about management missteps that have led to five consecutive quarters of declining profits.
The downturn caused Yahoo's stock price to plummet by more than 40 percent, erasing about $20 billion in shareholder wealth, in the three months leading up to Microsoft's bid.
Seizing on an opportunity to expand its clout on the Internet, Microsoft dangled a takeover offer that was 62 percent above Yahoo's stock price of just $19.18 when the bid was announced Feb. 1. Yahoo shares ended the past week at $29.20.
Led by company co-founder and board member Jerry Yang, Yahoo now will be under intense pressure to lay out a strategy that will prevent its stock price from collapsing again. What's more, Yang and the rest of the management team must convince Wall Street that they can boost Yahoo's market value beyond Microsoft's offer.
Yahoo's shares traded at $31 as recently as November, but have eroded steadily amid concerns about the slowing economy and frustration with the slow pace of a turnaround that Yang promised last June when he replaced former movie studio mogul Terry Semel as Yahoo's chief executive officer.
This isn't the first time that Yahoo has spurned Microsoft. The Redmond, Wash.-based company offered $40 per share to buy Yahoo a year ago only to be shooed away by Semel, according to a person familiar with the matter. The person didn't want to be identified because that bid was never made public.
Yahoo now may want that Microsoft to raise its price to at least $40 per share again. That would force Microsoft to raise its current offer by about $12 billion — a high price that might alarm its own shareholders.
Microsoft's stock price already has slid 12 percent since the company announced its Yahoo bid, reflecting concerns about the deal bogging down amid potential management distractions, sagging employee morale and other headaches that frequently arise when two big companies are combined.

Although it isn't involved directly in the deal, Google is the main reason Yahoo is being pursued by Microsoft.
Yahoo has struggled largely because it hasn't been able to target online ads as effectively as Google.
Microsoft believes Yahoo's brand, engineers, audience and services will provide the company with valuable weapons in its so far unsuccessful attempt to narrow Google's huge lead in the lucrative Internet search and advertising markets.
As it examined ways to thwart Microsoft, Yahoo considered an advertising partnership with Google — an alliance long favored by analysts who believe it would boost the profits of both companies. It was unclear Saturday if Yahoo's plans for boosting its stock price include a Google partnership, which would probably face antitrust issues. A Microsoft takeover of Yahoo would also be scrutinized by antitrust regulators in the United States and Europe. The antitrust uncertainties could be cited as one of the reasons that Yahoo's board decided to spurn Microsoft

[Acid]

SAN FRANCISCO - Yahoo Inc. spurned Microsoft Corp.'s $44.6 billion takeover bid as inadequate Monday, betting that it can elicit a higher offer from the world's largest software maker or find another way to deliver a comparable payoff to its shareholders.

The rebuff by the slumping Internet pioneer had been widely anticipated after word of Yahoo's intention was leaked during the weekend.
In its formal response, Yahoo said its board had concluded Microsoft's unsolicited offer "substantially undervalues" the Sunnyvale-based company.
Yahoo indicated it could be lured to the negotiating table if Microsoft ups the ante, without mentioning the price it has in mind.
"The board of directors is continually evaluating all of its strategic options in the context of the rapidly evolving industry environment and we remain committed to pursuing initiatives that maximize value for all stockholders," Yahoo said in a statement.
Investors appeared confident that Microsoft wants Yahoo badly enough to raise the stakes. Yahoo shares rose 34 cents to $29.54 in Monday's morning trading while Microsoft shares fell 46 cents to $28.10.
If Microsoft doesn't raise its offer, Yahoo Chief Executive Jerry Yang assured employees in a Monday e-mail that the company is poised to rebound on its own and become a "must buy" in the $45 billion online advertising market.
"We have accomplished a great deal in a very short time," wrote Yang, a company co-founder who promised things would get better after he became CEO eight months ago. "Yahoo is a faster-moving, better organized, more nimble company well on its way to transforming the experiences of its users, advertisers, publishers and developers."
Just two days before Microsoft made its bid, Yang had warned Yahoo faced "headwinds" that made it unlikely the company's performance would improve significantly until 2009.
Yahoo's stock price had dropped by more than 40 percent in the three months leading to Microsoft's bid, valued at $31 per share when it was announced Feb. 1. The offer was 62 percent above Yahoo's market value at the time.
Many analysts believe Redmond, Wash.-based Microsoft will eventually raise its bid to $35 to $40 per share, sweetening the pot by $5 billion to $12 billion in an effort to negotiate an amicable sale.
Microsoft was prepared to pay at least $40 per share for Yahoo a year ago, according to a person familiar with the talks between the two companies a year ago. Yahoo wasn't interested then because it was confident in its own strategy, said the person, who didn't want to be identified because Microsoft's 2007 offer was never publicly disclosed.
But a higher bid now could hurt Microsoft's own stock price, which has been slipping amid concerns that a Yahoo takeover could be more trouble than its worth. Microsoft's market value has plunged by more than $40 billion, or 14 percent, since the bid was made public.
Microsoft representatives didn't immediately respond to requests for comment Monday morning.
RBC Capital Markets analyst Jordan Rohan predicted Yahoo's board will have little choice but to sell the company if Microsoft raises its bid to $35 or $36 per share. "Yahoo management has already exhausted the patience of its largest, longest-suffering shareholders," Rohan wrote in a Monday note.
If it doesn't want to pay more money, Microsoft could take its original bid directly to Yahoo's shareholders. Microsoft's management began preparing for that possibility last week by meeting with some of Yahoo's major shareholders to rally support for its offer.
In a more extreme tactic, Microsoft could try to override Yahoo's board by trying to oust the current directors later this year — a risky maneuver that would likely create hard feelings that would make it more difficult to cobble the two businesses together if a deal were consummated.

Yahoo also could fend off Microsoft by exercising an antitakeover device, known as a "poison pill," that would issue more company shares to make a buyout too expensive to pull off.
Although its profits have been dwindling during the past two years, Yahoo still possesses one of the Internet's biggest audiences and most valuable franchises. Microsoft believes it can build on those assets to become a more formidable competitor to Google Inc., which now holds a commanding lead in the lucrative online search and advertising markets.
Yahoo has reportedly been exploring an advertising partnership with Google as one way to boost its profits and remain independent. The company also has been looking for other suitors that might be interested in countering Microsoft's bid, but so far no one has stepped forward.
By rejecting Microsoft's initial offer, Yahoo's board is running the risk that the company's stock will plunge below $20 per share again if its suitor decides to walk away. That scenario would probably unleash a flood of shareholder lawsuits, intensifying the pressure on Yahoo's management team to deliver on a long-awaited turnaround that has been in the works for the past 18 months.

[Vandana]

Acid,

These are good points - but you need to do the following, to show APPLICATION:

1) edit your 2 quotes and summarise the main points
2) relate your opinion, on whether you agree or not
3) explain with YOUR reasoning whether it would be beneficial for Yahoo

Can you do this? I am sure you can

PS - we should not cut and paste articles generally, as we are infringing copyright. You can summarise or take the main points out, but you should always refer to your source.

[dee]

no answers, but just some food for thought that may point us in the right direction...

1) Why is Microsoft bidding for Yahoo?
>> it obviously sees value in combining Yahoo with Microdoft - maybe things like cost savings (eg. no need to have 2 teams for R&D, developers, marketing,..etc) but then this value can only be onlocked by another company with common operations/markets and not as an independent company. surely the value of a company is independent of the bidder?

2) Some analysts are saying the Microsoft is bidding too low and needs to increase their price per share. Why is this the case? Does that mean Yahoo is undervalued? Why could that happen?
>> Yahoo shares were trading at around $19 before the bid. So thats what the market valued Yahoo at. Microsoft bid $31 a share, 62% higher than the market value. So how can analyst say Microsofts bid undervalues them? If Yahoo was undervalued why was it not trading higher? If it were just that Yahoo shares were overlooked by the market then surely they would be trading near the kind of value they should be (above $40 according to analyst) now but they are still nowhere this; why? One other thing to look at is the Microsoft offer - it is not just a simple $31 cash for each share but approx half in cash and half in stock of the combined company - so its own bid is based on the valuation of the combined company; maybe it is using an inflated valuation of this combined company.

3) Why is Google concerned?
>> it obviously sees a Microsoft/Yahoo company as a threat to its revenues. Why? they are both competitors now, so how is a combined company an even greater threat?

[Asif]

Acid,,,the writings u posted is too lengthy to read man !!!:eek:..i dont think u even read the whole thing...or did u ??:confused:

[Vandana]

I agree - that's why I have asked him to cut it down - Acid I have laid down the gauntlet - can you summarise your posts into the main points???