Some fews days ago, Microsoft withdrew its bid to acquire Yahoo after failing to agree to a price even after Microsoft raised its bid, which was about $5 billion more than the original offer. According to Yahoo CEO, the company was grossly undervalued by Microsoft. Consequently, Yahoo share price fell significantly following the withdrawal(BBC News,2008).
Now that the deal is no longer on the table, Yahoo must convince investors it can turn the company around and deliver on promises that it can grow its revenue at a pace that pleases Wall Street(equivalent of the City in London) and allows Yahoo to compete successfully against Google in online advertising.
Shareholders already are getting restless. Some Institutional shareholders plan to expand a complaint, originally filed as two lawsuits In March 2008, against the CEO and other members of Yahoo’s board of directors, saying they failed to act in the best interest of shareholders in rejecting Microsoft’s bid to buy Yahoo. It is expected that Yahoo will face similar law-suits in the coming months.
The attempt to acquire Yahoo by Microsoft was seen as an attempt to match Google on advertising revenue. It is alleged that Google played a part in undoing Microsoft bid for Yahoo to undermine Microsoft Advertising business(Yahoo News). Matter of fact, Yahoo did a test run on Google’s advertising Adsense inorder to discourage Microsoft from launching a hostile takeover bid (how smart of Google!!!). In the end Google wins in the Microsoft-Google-Yahoo triangle. But are Yahoo the most stupid in all this? How can a business out-source a strategic part of its business to a competitor?
The question is why would the CEO and other directors at Yahoo Inc. reject an offer which is seen by many analysts as a good offer at the expense of shareholders’ wishes? In the meantime, who is going to tame this animal-Google? Would Microsoft organic growth be enough to mount enough challenge.
In the end, the guys at Google are smart not only technically, but also business-wise. Sadly, it is the Yahoo shareholders who are the most victims.
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