*UPDATE 6: Here’s our full interpretation of what yesterday’s hoo-haa was about and what is likely to happen next.
*UPDATE 5: OK…after scanning even more reports this morning, including the NY Post’s, here’s our latest take on what’s going on here:
- Microsoft is, understandably, impatient (and annoyed)
- Microsoft has several reasonable arguments why Yahoo’s stock would be worth less today than when they bid on it, including deteriorating market conditions, loss of more search share to Google, loss of executives, implementation of fat severance plan, etc.
- Microsoft has a mercurial CEO whose reputation for sudden aggressiveness makes a hostile move seem plausible
- Microsoft decided to increase the pressure on Yahoo by sending a detailed message directly to Yahoo shareholders through the press.
- Microsoft leaked a carefully coordinated story and quotes to several publications, some of which were able to get the sources slightly off message (thus the note in the NYT that Microsoft was NOT considering cutting its offer).
- Microsoft will see what impact this latest attempt at escalation has on Yahoo. Then, perhaps, it will announce a public tender offer (an offer directly to shareholders), file a slate of directors, or otherwise take more aggressive steps. We doubt Microsoft will cut or pull the bid.
*UPDATE 4: Microsoft blew this one. A careful leak to a single outlet suggesting that Microsoft was considering slashing or yanking the offer could have put the fear of God in Yahoo shareholders, who would quickly have put it in Yahoo. But now, thanks to the same on-message leaks to what will soon be every publication in the western hemisphere, it’s obvious this is all just bluster.
*UPDATE 3: Miguel Helft in the New York Times confirms that this is all hot air. Same sources, same message, but this time the additional information that “Microsoft is not considering lowering its offer or withdrawing it all together.” This means that Microsoft is “evaluating” the offer the same way people always evaluate offers–which is to say, they ruminate about them from time to time. With this assertion, the standard “market is deteriorating” Microsoft quotes in the NYT just sound whiny.
*UPDATE 2: Todd Bishop from the Seattle PI chats with the same source (or another who remains almost perfectly on message). Todd emerges with an additional quote, however, one that suggests that Microsoft’s “evaluation” of the offer is not necessarily anything new and that it won’t necessarily lead to a decision soon–further confirming that this is just a message to Yahoo shareholders.
The person I spoke with cited factors including general market weakness, possible declines in Yahoo’s search market share, the tepid analyst reaction to Yahoo’s three-year business plan, the departure of key Yahoo employees. “All indications are that the market will continue to deteriorate, and Microsoft will continue to evaluate its offer in that context,” the person said, declining to go into detail about the potential outcomes.
*UPDATE: AP runs the same story without citing Reuters, thus confirming that this is a coordinated leak. AP also includes a detailed justification for the “evaluation” and a quote from the source all but confirming that Microsoft is just trying to drive Yahoo to the negotiating table. AP:
A person familiar with Microsoft’s bid for Yahoo said Friday the software company is evaluating its offer in light of the economic climate and the Internet pioneer’s deteriorating business.
The person, who asked not to be named because he was not authorised to speak publicly, said Yahoo Inc.’s share of the search market and overall condition have deteriorated since Microsoft announced its bid Feb. 1.
On Friday, the person familiar with Microsoft’s thinking said the company has been patient — but will be so only to a point.
“It’s up to Yahoo’s board to engage in meaningful negotiations with Microsoft,” the person said.
[In our opinion, leaking the story to two outlets was a tactical error, as was the direct “message” quote. If only Reuters had reported the story, it would have been conceivable that Reuters had actually talked to a mole and that Microsoft might not just be trying to send a message to Yahoo’s shareholders. This quote and the AP details, however, confirm that that is exactly what Microsoft is doing.]
[Amusingly, the latest Reuters story has the exact same quote and also a line that is patently balderdash: Reuters’ sources, Reuters says, were “declining to be named because they are not authorised to speak on the matter.” Not authorised to speak on the matter? Please. They were ordered to speak on the matter.]
EARLIER: Now it gets interesting. Reuters reports that Microsoft (MSFT) is rethinking its Yahoo (YHOO) offer in light of Yahoo’s intransigence and worsening market conditions. Translation: Microsoft might pull or cut the offer. YHOO tanks after-hours, MSFT soars.
SAN FRANCISCO (Reuters) – Microsoft Corp is evaluating its offer for Yahoo Inc in light of worsening market conditions, a person familiar with the matter said on Friday.
Microsoft has been repeatedly trying to engage Yahoo’s board in discussions, this person said. But the market has deteriorated and changes in Yahoo’s business may have dragged down its value below what it was when Microsoft made its $44.6 billion bid for the Internet company on January 31, this person said.
Could this be a negotiating tactic? Yes. Could it also be real? You bet. Microsoft has been more than patient.
If this is just a leak designed to put the fear of God into Yahoo shareholders and prod them into calling Jerry and harassing him to enter serious negotiations, it will probably work. If it actually represents the truth and Microsoft is actually considering pulling or cutting the offer, it will probably have a similar effect.
In any case, it seems Microsoft’s patience has run out.
See Also: Microsoft and Yahoo Meet Again: No Deal
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