Yahoo shares plummet post Ballmer comments

Yahoo shares went into a free fall Friday morning, following comments made by Microsoft CEO Steve Ballmer that the software giant would not make a renewed bid for Yahoo.

Shares of Yahoo plummeted as low as 16.5 percent in Friday trading, landing as low as $11.65 a share.

Ballmer, speaking at a Committee for Economic Development of Australia , said:

Look, we made an offer, we made another offer. It was clear that Yahoo didn't want to sell the business to us, and we moved on.

We are not interested in going back and relooking at an acquisition...I don't know why they would be either, frankly.

Investors apparently were holding out hope deal talks would be reignited, after Yahoo CEO Jerry Yang on Wednesday said at the Web 2.0 conference that Yahoo was willing to sell the company to Microsoft:

To this day, I have to say that the best thing for Microsoft to do is to buy Yahoo. I don't think that is a bad idea at all...at the right price, whatever the price is, we are willing to sell the company.

We were ready to negotiate, we wanted to negotiate a deal, and we felt that we weren't that far apart. But at the end of the day, they withdrew and they since have been very clear about not wanting to buy the company.

Yang made those comments on the same day that Google walked away from their planned search advertising partnership, after federal antitrust regulators informed the companies it would file a lawsuit to block the deal should they proceed.

Yahoo, which had hoped to generate $800 million in revenue in the first year of that search advertising agreement, unveiled the Google partnership plans last June, within hours after announcing buyout talks with Microsoft were over and the software giant was no longer interested in acquiring the company at its previous offer of $33 a share. Yahoo had countered with $37 a share, before Microsoft walked away.

But Sandeep Aggarwal, an analyst for Collins Stewart, noted in a research report Friday that the market is overreacting to Ballmer's comments:

We do not view Ballmer's comments about no interest in (a Yahoo) acquisition as an incremental data point. What is more important and incremental is that CEO Ballmer's comments are providing clear endorsement that (Microsoft) is still very interested in a search only deal (a clear positive for Yahoo). Since Microsoft walked away from YHOO on June 12, we have been consistently highlighting that Microsoft will very likely come back but for a search only deal and we stand by our thesis. Investors do not have to see a full YHOO acquisition right now to realize full and fair value for YHOO and a search only deal by Microsoft can provide material upside to the shares of YHOO. We believe that MSFT's search proposal can give $8 to $10 per share lift to Yahoo even based on very simple and achievable economics.

We will take today's weakness in the shares of YHOO as an opportunity to get into YHOO as Yahoo offers material option value for its search business, especially now that we all know that MSFT continues to be very interested in that business.

We expect to see a search-only deal proposal from Microsoft. This proposal may not be as lucrative as the one we saw on May 29, but it can still give $8 to $10 per share lift to YHOO. We believe that a new proposal from MSFT is a very near-term event.

We would highlight four reasons (for Yahoo to accept a search-only deal from Microsoft) 1) No material upside to the shares of YHOO on fundamental basis but a possible search deal with MSFT can easily give $8 to $10 per share lift, 2) Google continues to make YHOO less relevant in search and it is better to get a premium for the search business now from MSFT before it is too late, 3) Core search is emerging as a duopoly and companies that are willing to invest billions in Cap-Ex and deploy thousands of engineers will emerge as the top providers and YHOO has not made and cannot make that level of investments, and 4) a shift of focus from search to the rest of the businesses can help YHOO's management to provide investors a material upside in valuation in the next two to three years with laser focus and unparallel execution.

Yahoo investors have been on a wild ride this year, with every comment from Ballmer and Yang sending the stock on roller-coaster ups and downs.

Yang's comments regarding Microsoft on Wednesday sent Yahoo's shares up as much as 11 percent to $14.84 a share, despite the duel announcement that the Google deal was over.

[Super2online]

It seems to me that Balmer's statements were pretty clear, I fail to see how "we are not interested in a Yahoo aquisition" could somehow be twisted into "but we are definately interested in a search deal" is beyond me. And if aquiring Yahoo's search assets are so materially lucrative, why aren't those assets improving Yahoo's search standing? And after aquiring them, what makes anyone think it's going to improve Live Search's standing? I think the price of Yahoo is going to have to continue to fall considerably before Balmer would even consider a search deal.

[The_Decider]

Ballmer didn't even know why he was lusting over Yahoo. He still get understand the Internet or the Web.

In a way, I wish it the buyout was successful, because MS would be in debt, they would have a ton of Linux based code they wouldn't know what to do with and would have a few more empty buildings.

It would have hastened the decline of MS.

Frankly, I can't believe MS shareholders didn't nail Ballmer to the wall. It was an inept move by an inept CEO.

Yahoo will recover, MS will continue its decline.

[alaris3k]

you aren't too bright now, are you.

[J. Blow]

Are you on dope? Yahoo is the AOL of the later part of this decade. MS continues to grow.

Steve doesn't want Yahoo because Jerry made the culture toxic to an MS acquisition and that makes it very hard to complete a deal for damaged goods.

[Vegaman_Dan]

Microsoft could use more empty buildings- they have built another entire campus the size of a major shopping mall and that is already prefilled with people waiting to get in. Most offices are double and triple occupied. They bought out Nintendo's property so once Ninendo moves, they will take over that area. At this point, they need far more space than is available.

I don't think people will want to commute to the Bay area though. :)

MS's 'inept CEO' is still returning a profit to the investors, especially in this down economy. Yang has only caused investors to have lost 2/3 of their stock value and it appears to be heading down even further.

Your comments are humorous and well worth a chuckle on this rainiy day. Thanks for sharing.

[Seaspray0]

You are perfectly clear that you would love to see microsoft decline. You're hate of microsoft is obvious in every one of your posts. That's why nobody can trust anything you say concerning microsoft.

[lbastie-2237310305301486239950]

which decline for MS? Yahoo is in trouble for sure. MS isn't. Read the financial news.

[Renegade Knight]

The "Software as a subscription" model. It's not. MS either needs to grow in other areas, or it's going to shrink as a company to a more sustainable size.

[Vancouver604]

At that time, Yahoo's share was hovering $25 - $27 per share. MS's offer at $33 share was good. But noooo, Jerry Yang was greedy. He wanted $37 per share. Jerry Yang deserved for that mutiny and bad rep he's getting now. I wouldn't be surprised if there was unanimous/landslide vote to oust Jerry Yang out.

It was good the MS walked away from that table. It was not viable. I stand behind MS'sdecision to walk away and move on.

Just like the saying goes, first impression is the last impression. The moment you burp/fart in an personal interview, we don't want you to work for us. Plain and simple.

[Renegade Knight]

Your logic is out of kilter.
If it's good that MS walked away, then it wasn't good they were ever there to begin with.
If the original offer was good, then MS should be there now trying to capatilize on the lesser share price.

Personally if MS doesn't get it's lead out and figure out a few things their own shares will fall through the floor and they will burn through all that cash they are stitting on and have nothing (not even Yahoo) to show for it.

[Seaspray0]

@Renegade Knight. Would you want to deal with somone who told you to stick it where the sun doesn't shine not long ago, or would you rather watch that person go down in flames? I think Balmer's response was the equivalent of dousing Yang with gasoline and waiting for the stockholders to light the match.

[Renegade Knight]

That shares change price because of an outsiders comments just goes to show you that some stock advice I was given as a kid is still good. "If you can understand the psycology of mass hysteria" it will go a long way towards advanding your speculation career". That's a paraphrase.

[alaris3k]

Ballmer will reconsider at the fire sale, when yahoo is at $3 a share.

[mailbox001]

Has anyone wonder if this was Ballmer's goal from the beginning? Beside the economy going down hill and effected everyone, what better way of eliminating competition by creating chaos within Yahoo. Once Yahoo is out of the picture, then MS automatically becomes No.2. After all of MS Monopoly lawsuits, they are smart not to dominate the areas that there in. 2nd or 3rd place is fine for them, as long as they are a top player in each area.

[Vegaman_Dan]

Yahoo's value on the market.... can we say... penny stock?

Nah, it will get bought out by someone if it keeps going lower. Microsoft may buy it if only to put Yahoo out of its misery.

[gggg sssss]

I told you so. I said $11.00 BUHAHAHAHAHAAHAH

[gggg sssss]

Agarwaal should probbaly be right up there with the crooks who touted internet crap last time around - can't remember their names.Jail time would be a start.

[britney1940]

In my opinion this is an interesting article through which i gathered a lot of information.
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Britney
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[wmrssussan]

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