Microsoft-Yahoo (YHOO): Has Microsoft (MSFT) Really Walked Away?

Did Microsoft (MSFT) really walk away from the Yahoo (YHOO) deal? Or was the weekend’s behaviour just yet another negotiating tactic? Or, more importantly, if it wasn’t intended to be a negotiating tactic, will it become one, as Yahoo’s shareholder rebellion grows?

Despite Yahoo’s suggestion to the contrary, we have yet to hear from a single Yahoo shareholder who publicly supports Yahoo’s board’s decision to hold fast at $37. Legg Mason’s Bill Miller, once Yahoo’s biggest supporter in the quest for a higher bid, seems dismayed. Employees seem dismayed. The market seems dismayed.

And no wonder: Yahoo has made every point it can in its insistence that $31 “substantially undervalues” the company, and despite all of this–including the much-ballyhooed Google search partnership–and the market still says Yahoo is worth all of $22.

It doesn’t seem inconceivable that, over the next few days, Yahoo shareholders will effectively insist that negotiations be re-opened–in which case, Microsoft will have “gone hostile” without going hostile, just by walking away. And if negotiations are reopened as a result of shareholder unrest, of course, the advantage will have shifted overwhelmingly to Microsoft.

See Also: Yahoo: Out of Touch

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