Yahoo Saying No to Microsoft Offer

Yahoo is rejecting an unsolicited $44.6 billion offer from Microsoft. But it remains to be seen whether Yahoo shareholders will support a management decision to snub the software giant's bid.

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RENEE MONTAGNE, host:

As the writers strike moves towards a settlement, there are new developments today in a story that links an Internet media giant and the world's largest software maker. Yahoo has formally rejected a huge takeover bid from Microsoft. On the table was an unsolicited $44.6 billion offer. NPR's Laura Sydell has been following this story and joins us now to explain more.

And Laura, Yahoo's board said Microsoft's offer, quote, "substantially undervalues the company." How can they call it a low-ball bid?

LAURA SYDELL: Well, that's a good question, given that Yahoo was trading for less than $20 a share and Microsoft offered $31 a share for the company. Yet it was a low-ball bid. As with any negotiating situation, Microsoft has more to offer and Yahoo probably knows that. So they're going to say no to the first offer, as many people would when somebody makes you a first offer and you're negotiating.

And I don't really think they're dying to sell the company. This is Jerry Yang's company, the current CEO. He's also the co-founder. And he really doesn't want to sell. But I think they're probably going to end up having to sell, and if they're going to do it, they are going to get as much as they possibly can.

MONTAGNE: Where does today's decision to rebuff Microsoft leave Yahoo?

SYDELL: Well, it leaves them pretty much waiting around for the next offer. I think they've been trying to court some other people, but that's not looking very good. They've tried to get Rupert Murdoch or AT&T behind the scenes. So they're now going to wait to see what Microsoft does, and I think Microsoft is in a strong position here, because for the shareholders this is going to look good. If the board says no, Microsoft can just start courting the shareholders. Already you've had shareholders who are saying they would be willing to sell to Microsoft, which - wouldn't you, if your company had been valued at less than 20 and this bid brought it up to over 30?

MONTAGNE: And remind us why Microsoft wants Yahoo so badly - or, perhaps now in the past, wanted.

SYDELL: Yes, and I think still wants it. I'm sure they will come back with another offer. Search is the key to online ads. And Microsoft knows that. As it stands right now, Google is dominating this space. In December alone Google got 60 percent of online searches, Yahoo around 18 percent, and Microsoft around 14 percent.

So if you put Microsoft and Yahoo together, they would have a chance, perhaps, of really competing with Google. And Microsoft knows this and Microsoft wants to get in there and really try and fight against Google, because Microsoft realizes that the Internet is really going to be the future of technology.

MONTAGNE: And what about Google in all of this? What's its thinking?

SYDELL: Google has already suggested to federal regulators that they do some kind of an investigation into this, because they think that this will be a violation of anti-trust regulations. It's a little bit of a hard argument to make, given that Google had, as I said, about 60 percent of the online searches in December. But they're saying to federal regulators, you should look into this, because Microsoft is a company with a history of monopolistic behavior, and they will use the same tactics on the Internet.

Again, I don't think it's going to be an easy argument to make, but I'm sure federal regulators will indeed take a look at this merger if in fact it were to go through and Yahoo were to eventually take an offer from Microsoft.

MONTAGNE: Laura, thank you.

SYDELL: You're quite welcome.

MONTAGNE: NPR's Laura Sydell reporting from San Francisco on the news that Yahoo this morning has rejected the takeover bid by Microsoft.

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Yahoo Rejects Microsoft Bid

Yahoo Inc. on Monday rejected a $44.6 billion dollar buyout bid from Microsoft Corp., saying the offer was too low.

Yahoo said in a statement that its board unanimously rejected the bid from Microsoft, despite the fact that Microsoft's $31-a-share offer was a 62 percent premium compared to Yahoo's stock price.

Yahoo officials said the offer "substantially undervalues" its global brand, large worldwide audience, significant

recent investments in advertising platforms and future growth prospects, free cash flow and earnings potential, as well as substantial unconsolidated investments.

The move sets the stage for struggle between Yahoo's board and shareholders, who may be skeptical that company should keep going it alone.

Some investors think Yahoo has stumbled as it failed to keep pace with Google in search and online advertising.

Microsoft now must decide whether to increase its offer, launch a proxy fight or simply withdraw.

Meanwhile, Yahoo is reaching out to other potential partners.

If completed, a merger of Microsoft and Yahoo would be the world's largest of two computer technology companies and would create a formidable rival to Internet search and advertising leader Google Inc.

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