Microhoo! Round Two

The loudest merger of 2008, Microsoft and Yahoo rumbles on. Round One may be over, with Microsoft having withdrawn their bid, now that Yahoo have asked for $37 per share (rather than the $33 Microsoft were offering) but now we have Round Two. Ding! Ding!

The Yahoo shareholders wade into the ring... this is beginning to sound like a WWF tag match!

Eric Jackson (Ironfire Capital, Yahoo shareholder), from the BBC article on this subject, said, "Yahoo's stock has essentially been flat for the last four years while the market has gone up over 30% and Google has gone up 440%. So the comparisons are stark and the board has not been doing its job."

And what is the job of the Yahoo board? To service customers? To bring more eyes to their advertisers' properties and increase their sales? To encourage discourse and the development of the Web into a globally available, multi-cultural resource for the furtherance of humankind?

No! The only legal responsibility of the board, in a public company is "to increase shareholder value." Baldly put, make the rich investors richer.

Guess what, selling Yahoo to Microsoft at $33 a share (the offer from Microsoft) would garner roughly $44.6bn to be split between the current share holders, assuming MS buys all the shares to achieve the takeover. That's an awful lot of 'shareholder value' that's locked up in the company. Ah, but there's the key.... it's locked up in the company, and the corporate vulture set can't get their grubby little mitts on it, unless MS buys Yahoo from them, at a 70% premium over the price at the time of the offer ($19.18) ! The actual trading price on the NASDAQ of Yahoo shares leapt a staggering 48% on the day of the bid (1st Feb 2008) to $28.38. Even now, 3 months later, with Microsoft's bid withdrawn, the stock price is still in the mid- to upper-$20 range. Boo hoo! I want my money back!

Never mind the serious lack of similarity between Microsoft and Yahoo. One uses a lot of real computers, the other is Microsoft. One has a search engine that has some market share, the other has a search engine nobody uses. I'd never even bothered to look at Microsoft's Live Search until researching this post! And now I find that the results pages look like a direct rip-off of the Google pages. I guess Microsoft does love Google after all, imitation being the sincerest form of flattery and all that. Anyway, along with many other commentators, I don't see what possible synergies there are between Microsoft and Yahoo that could outweigh the massive organisational paralysis and technical nightmares that a merger would cause.

Finally, a final note from the BBC article on this subject: "In 2006 [Carl Icahn (another major Yahoo investor)] unsuccessfully pushed for the break up of Time Warner. In a recent interview on America's 60 Minutes programme he said: 'Maybe I made a mistake, but I made $300m on it. So is that so bad?'" Well, if your motivation is purely personal enrichment then, no, that wasn't so bad. Damn the consequences, good or bad.

It would clear my mortgage anyway.