Steve Ballmer, the CEO of Microsoft, has announced that his company has retracted its offer to buy out the struggling Yahoo.com in a multibillion-dollar stock offer. The retraction surprised many, considering that Mr. Ballmer had once called the Yahoo deal “crucial to the future of Microsoft.”
Meanwhile, Yahoo’s stock declined sharply on news of the Microsoft withdrawal, leaving shareholders wondering if the Yahoo overplayed its hand. Microsoft had offered $31 per share for Yahoo, a significant increase over the stock’s traded price, and a price-per-share not likely to be seen again for some time (if at all).
The New York Times is reporting that Mr. Ballmer even sent a courteous thank you note to Yahoo CEO Jerry Yang to convey his “personal thanks” for considering the Microsoft buyout offer. While this was obviously a very civil and gentlemanly thing to do, many Wall Street analysts are expressing concern that Ballmer may not have the “killer instinct” to push through aggressive deals like the proposed Yahoo buyout.
For now, Yahoo appears to be the loser in the transaction, but writing for the New York Times, Andrew Ross Sorkin points out that Microsoft has also been dealt a serious blow by their failure to aggressively pursue the Yahoo deal. Sorkin suggests that Mr. Ballmer “waffled” when Yahoo CEO Jerry Yang refused to simply cave in to Microsoft’s demands.
Microsoft, on the other hand, claims that the buyout withdrawal was a sign of Microsoft’s fiscal discipline and self-control. But there is no denying that some on Wall Street also view it as a sign of weakness and indecisiveness. Many believe Mr. Ballmer also failed to consider the opinions of Microsoft’s biggest shareholders before instigating the Yahoo buyout deal in the first place.
Most of the major Microsoft stockholders were opposed to the Yahoo deal. A fact that eventually led to Microsoft’s stock being diminished as well. The New York Times reports that Microsoft stock has lost $24 billion in overall value since the announcement of the Yahoo buyout offer.
Ballmer’s credibility as Microsoft CEO has also been significantly damaged by the failure of the Yahoo bid. At one point, he promised to take the bid directly to Yahoo shareholders if the Yahoo board failed to reach an agreement on the offer within three weeks. But then, inexplicably, he allowed the three-week deadline to pass without saying a thing.
The failed Microsoft-Yahoo deal shows that in corporate takeovers, even the losing party can come away looking like a winner — and vice versa.
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Microsoft will continue to test the waters for acquiring Yahoo!, in whole or in part.
Comment by Claude Gelinas — July 4, 2008 @ 8:44 am