Musings on MSFT-YHOO

I keep dropping stuff in both the NewsGator Clippings folder and del.icio.us on our MSFT-YHOO page, but since Dare was kind enough to work up a chart I was just thinking about, I thought I would add a few thoughts of my own (as well as a couple of additions to his chart – DJIA and YHOO):

msftchart_5 Opinion (click on the chart for up to date figures)

Much has been written about the acquisition attempt, and while things are actually playing out pretty much right to Microsoft’s schedule, in the absence of any real news the speculation seems to get wilder and wilder.  From "Microsoft’s investors hate the idea", to "Microsoft should buy SAP instead", pundits are scrambling for stories.  While this serves to  keep readership up, really we’re just waiting for the inevitable: Microsoft acquires Yahoo!, for pretty much the offer it made in the beginning, the deal to be completed sometime in the second half of this year.

This little lull between bombshell announcements allows us to take a look at the numbers as they settle in, however.  Pretty obvious from Yahoo!’s stock price where the acquisition announcement was made (on Feb 1), but after a drop in stock price that leveled out at something less than 10%, MSFT has followed the Dow Jones closely, both before and after the acquisition announcement.  A quick reading of the numbers shows that investors are looking at a stock price for YHOO right around at what MSFT is offering, as YHOOs price is tailing off from around $29.  And if Microsoft is seen to be a big loser in the deal, it sure isn’t reflected in the stock prices of its competitors, which would seem to gain in Microsoft’s loss.

It probably doesn’t even matter much whether or not Microsoft acquires Yahoo! through a "bear hug" sale, or through a proxy fight, the end result will be the same.  While I lamented Microsoft’s use of back room tactics the other day, I’m sure not betting against them when it comes to getting down and dirty.  Sure there was talk about it being cheaper for Microsoft to go through the proxy fight, but my gut feeling is that it won’t get that far.  There’s more pressure from Yahoo! investors to sell than there is (if any) pressure from Microsoft investors to back out, even with this wild speculation.

It’s also interesting to speculate what would be happening to Yahoo! right now if Microsoft hadn’t made the offer.  Jerry Yang’s plan to save the company hasn’t amounted to much so far.  A vague Open Search (not OpenSearch) offering, and some hand waving in the direction of new advertising tools, in light of what’s happening to Google, might well have sent Yahoo! into an even deeper tailspin than what it was experiencing just before the acquisition attempt was announced.

Of course we’ve got a ways to go before this all plays out, and then it starts to get interesting, with corporate culture clashes, and Asia, et al, but it sure is fun.