News

Tech Stock Flameout Sparks Microsoft-Yahoo Rethink

Yahoo's stock plunge has some reflecting to a time when Microsoft had initiated an unsolicited takeover bid for the online advertising company.

A volatile stock market, which sent Yahoo's stock plunging by eight percent on Thursday, has some reflecting back to the beginning of the year, when Microsoft had initiated an unsolicited takeover bid for the Sunnyvale, Calif.-based online advertising company.

Rob Sanderson, an analyst with American Technology Research, was widely quoted on Wednesday predicting that a new offer for Yahoo would be floated by Microsoft. Sanderson pointed to Yahoo's declining display ad revenues, its flagging search business and its unresolved ad revenue-sharing deal with Google as vulnerabilities.

Yahoo's stock has steadily declined since Microsoft's unsolicited takeover bid failed in May. Microsoft's initial offer of $44.6 billion on Jan. 31 amounted to paying a $31 per Yahoo share price, plus cash, for all of Yahoo. In contrast, trades of Yahoo shares closed on Thursday at $12.65.

Meanwhile, Microsoft has its own problems. Wall Street hedge fund manager David Einhorn announced on Tuesday that he is "done" investing in Microsoft.

"First, [Microsoft] sought to acquire Yahoo! and then after that failed, it announced extremely high internal investment requirements to pursue this 'huge' opportunity (read: 'Google-envy')," Einhorn stated in a letter to his investors. "We doubt the opportunity is what they say it is and wish MSFT focused on its core strength: software."

Microsoft's stock closed Thursday at $22.30, quite low compared with its 52-week range of $22.07 to $37.50.

Meanwhile, an ad hosting deal proposed by Google and Yahoo remains bogged down. Congress has been questioning the antitrust implications of the top two online search firms collaborating on ad sales. Microsoft strenuously opposes the deal, which was proposed during Microsoft's unwelcomed bid for Yahoo. Microsoft currently holds the No. 3 position in online search, trailing Yahoo. Google is still the leader in the online search market share by a wide margin.

Google stock closed Thursday at $328.98, down $9.13 for the day.

While tech-stock analyst Sanderson predicted that Microsoft will make another run at Yahoo, others have their doubts. Bank of America analysts Brian Pitz and Brian Fitzgerald were both quoted by Forbes on Wednesday as saying that the deal is "not likely in the short term."

Kara Swisher, of Wall Street Journal's Boomtown, downplayed Sanderson's speculation.

"Sorry to burst your pretty balloon, Rob [Sanderson], but that's not going to happen, according to my sources at Microsoft," she stated in her blog.

Microsoft, after ending its bid for all of Yahoo, expressed interest in buying just Yahoo's search business, and Redmond hasn't publicly budged from that position.

Swisher described her opinion on Microsoft's next steps regarding Yahoo.

"Microsoft plans to wait to see what happens in Yahoo's merger talks with AOL, an online unit of Time Warner (TWX)."

Yahoo and AOL reportedly have been discussing some sort of online advertising deal, with no details made public.

About the Author

Herb Torrens is an award-winning freelance writer based in Southern California. He managed the MCSP program for a leading computer telephony integrator for more than five years and has worked with numerous solution providers including HP/Compaq, Nortel, and Microsoft in all forms of media.

Featured

  • Microsoft Hires Movial To Build Android OS for Microsoft Devices

    Microsoft has hired the Romanian operations of software engineering and design services company Movial to develop an Android-based operating system solution for the Microsoft Devices business segment.

  • Microsoft Ending Workflows for SharePoint 2010 Online Next Month

    Microsoft on Monday gave notice that it will be ending support this year for the "workflows" component of SharePoint 2010 Online, as well as deprecating that component for SharePoint 2013 Online.

  • Why Windows Phone Is Dead, But Not Completely Gone

    Don't call it a comeback (because that's not likely). But as Brien explains, there are three ways that today's smartphone market leaves the door open for Microsoft to bring Windows back to smartphones.

  • Feature Update Deferral Mix-Up in Windows 10 Version 2004 Further Explained

    Microsoft last week described the confusion it is attempting to avoid by removing the client graphical user interface (GUI)-based controls to defer Windows 10 feature updates, starting with version 2004.

comments powered by Disqus

Office 365 Watch

Sign up for our newsletter.

Terms and Privacy Policy consent

I agree to this site's Privacy Policy.