Yahoo Sees Rosy Future without Microsoft - Next Moves in the Game
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We can’t ignore the fact that this is playing out against the backdrop of Microsoft’s unsolicited takeover bid. Indeed, if Microsoft hadn’t made the bid, it’s questionable whether Yahoo would have gone public with this investors’ presentation. Many analysts speculate that the entire point of the move is to get Microsoft to raise its bid for the search engine.
The next move is up to Microsoft. The software giant is likely to stand firm for at least a little longer. First of all, it doesn’t really lose anything by waiting, with Yahoo running out of options. Second, if Alibaba actually does buy itself back from Yahoo, that will reduce the company’s value in Microsoft’s eyes, giving the OS king even more reason not to raise its bid.
There’s a third reason to hold firm and play the waiting game. Yahoo won’t be announcing its financial results for the first quarter of 2008 until April 22. While the search engine has expressed optimism that it will achieve the results Wall Street expects (and then some), it has experienced two years of little to no growth. The numbers that Yahoo delivers in late April will help decide Microsoft’s next steps.
Every investment vehicle says that “Past performance is not a predictor of future growth.” Yahoo seems to be depending on this, or at least on the idea that a company’s immediate past performance doesn’t have to be a trap for the future. If Yahoo can’t survive on its own, it would probably at least prefer to be purchased on its own terms.
A graceful, “friendly” buyout could still happen, but Microsoft holds the ultimate trump card: it could stage a coup and take over Yahoo’s board of directors. There’s less talk of that now than there was in the first couple of weeks or so after Microsoft made its initial offer. Indeed, CNN Money cited “a person familiar with the situation” as saying that the two companies entered into preliminary talks about Microsoft’s offer on March 17, which could open the way to an amicable marriage. Either way, in the face of Google’s dominance of the search market, both companies are running out of options for a strong future.
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