Microsoft’s most obvious option – and the one it’s least likely to take – is to take the rejection seriously and walk away. There are several reasons it won't do that, but Noel at the Search Engine Herald nailed a very important one: “If you think about it, who needs who? On the search front, I definitely believe that Microsoft needs Yahoo more than the other way around.” The London Times stated that “Microsoft is desperate to take over Yahoo! because of the threat that Google’s dominance of the online search advertising market poses to the computer company’s future.”
So what options are left to Microsoft, if it won’t be walking away from Yahoo’s rejection? If the software giant still wants to handle this carefully, it could simply raise its price. And it sounds prepared to do so. In an interview with Advertising Age, Yusuf Mehdi, Microsoft senior VP of strategic partnerships, notes that his company is committed to making the deal work. “Without a question, we are very committed to this combination. … We have a whole set of plans and preparations ready to go to make it work. And we’d like to do that in a cooperative way with Yahoo. No question – our commitment is clear with this one.”
So how much would Microsoft have to raise its bid to get Yahoo to take a look? Well, some analysts have said the software giant might be willing to raise its proposal to $35 or $36 per share, but even that might not be enough. The Times quoted “a source close to Yahoo!’s thinking” as saying a counteroffer “would have to be in the 40s to start talking, and we would have to get over regulatory issues. It would have to be an offer that would give Jerry Yang something to stand on a podium and smile about.”
The third option for Microsoft is to turn it into a hostile bid. That gives the company some interesting paths to pursue, thanks to the timing of their proposal. Yahoo begins its annual nomination process for board elections on Wednesday. It will run through March 14. Anyone who owns stock in Yahoo can make nominations. And – here’s the icing on the cake – all 10 of Yahoo’s board seats are coming up this election.
Bruce Goldfarb, a veteran proxy solicitor, figures that Microsoft is already working toward the goal of getting a favorable slate for itself. “If they haven’t done it already, they’re in the process of assembling an appropriate slate,” he said. “It’s fair to assume they will run for board seats, and it won’t take them long to fill the slate. We’re talking Microsoft here. They have resources and access to countless high-quality candidates to be a director.”
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