Yahoo shares fight to regain ground after open
This post was updated at 1:45 p.m. PDT with updated information following the market's close:
Yahoo's shares took a hammering early Monday morning. But by the market's close, a badly beaten, but not mortally wounded, Yahoo ended the day down 15 percent at $24.37 a share.
Microsoft closed out the session at $29.08, down 0.55 percent.
This blog was also updated at 9:50 a.m. PDT.:
Yahoo shares fought back some of their losses in late morning trading, reaching $24.70 a share, down 13.85 percent from Friday's close.
At the start of the session, the Internet search pioneer was down nearly 20 percent, and in premarket trading down 22 percent.
Microsoft's gains have been shrinking through the morning, leaving the software giant up 0.24 percent to $29.48 a share in late morning trading.
Since the opening bell, shares of Microsoft, which remain in positive territory, have been edging slowly south, while Yahoo, which plunged into the red following Redmond's withdrawal over the weekend of its unsolicited buyout bid, has been pushing upward. Whether this convergence is a sign investors believe the parties may lock horns again has yet to be seen.
"We believe that Microsoft's decision to walk away is driven by its desire to expose Yahoo management as apathetic to shareholder interests," Heath Terry, a Credit Suisse analyst, said in a report.
Needham analyst Mark May, meanwhile, anticipates Yahoo will make a move to appease its shareholders by announcing a "transformational partnership or transaction," such as a Google ad outsourcing deal.
"However, it remains unclear if this deal alone will enable Yahoo to hit the aggressive (2009 and 2010 financial) projections it recently set forth, and we believe some large Yahoo shareholders are unhappy with the prospect of outsourcing a meaningful portion of the company's strategic business," May stated in his report.
Yahoo kicked off at $23.02 per share as the markets opened Monday--down 19.7 percent from Friday's close. The Internet pioneer regained a bit of ground compared with its premarket price on Monday of $22.41.
On Saturday, Microsoft said the two companies could not overcome differences in opinion over the price of a potential acquisition. Microsoft was offering $33 a share; Yahoo wanted $37 per share. Yahoo's two largest institutional investors were willing to take $34 a share, according to a source familiar with their thinking.
Yahoo, prior to the bid's original announcement, had closed at $19.18 on January 31. Over the course of the three months since then, Yahoo's shares had traded as high as $30.25 and as low as $25.72.
Will it or won't it?
Wall Street has conflicting views on whether Microsoft will return to the negotiating table.
"We see the bid premium diminishing but not disappearing given...precedents for a thwarted bidder returning, such as Oracle/BEA," James Mitchell, a Goldman Sachs analyst, stated in a research note.
But Walter Pritchard, an analyst with Cowen & Co., doesn't believe Microsoft's decision to walk away was a negotiating tactic.
"Microsoft is far enough behind in (its online services business) that it needs to commit to a strategy, and waiting on a Yahoo acquisition simply puts the company further behind," Pritchard stated in a research report.
UBS analysts, meanwhile, believe that Microsoft still needs Yahoo and that a deal is still doable. But any chance for reigniting negotiations, they said, depends on whether Yahoo moves forward with its Google ad-outsourcing deal, as is expected midweek.
Microsoft shares creep up
Microsoft, meanwhile, opened at $29.95 per share on Monday, up 2.4 percent from Friday.
Shares in the software giant have been under pressure since Microsoft announced its buyout bid. Microsoft closed at $32.47 a share on January 31--the day before it announced its unsolicited bid. During the past three months, the stock had traded as high as $32.10 and as low as $26.87.
Microsoft, when it initially announced its buyout bid, had valued Yahoo at $31 a share. Last week, it raised the bid to $33 a share.
Pritchard predicted in his report that Microsoft stock will do well following the weekend's news. "We believe (Microsoft) shares can outperform the market by 10 percent over the next 12 months, although upside beyond this is likely capped due to worries of higher online services business spending coming," Pritchard wrote.
He added that instead of buying Yahoo, Microsoft would be better off acquiring "smaller but more innovative Internet companies" and taking an aggressive approach to signing advertising deals.
Microsoft, which had been relatively quiet on its plan B while its Yahoo quest was still alive, outlined a few of its options in a letter to its employees after the pullout.
Dawn Kawamoto covers enterprise security and financial news relating to technology for CNET News. E-mail Dawn. 
This will divide the dominance of google....
Microsoft can compete with google and takeover Yahoo!'s 2nd spot
but it takes time. Microsoft want Yahoo! to make the process
shorter... Microsoft has all the money to do that... Stupid Yahoo!
Money can't buy competence.
Besides, MS has no partners, only victims.
I am now changing my home page and search engines to Yahoo to in celebration! again, Way to go Yahoo!
EXTEND : Gee Google is more successful at Internet Search & Advertising then Microsoft since we are behind Google, Yahoo!, etc, etc, etc, as we were LAST to the Online Search Race.....MUST DESTROY GOOGLE.
EMBRACE : Hey, Yahoo! want to be friends? We can share technologies & help each other against that "THREAT" Google...OK?
EXTINGUISH : WHAT!? You don't want to play with the 800 pound gorilla MSMonopoly? We are taking our money & going home to Redmond!
Stock market goes nuts & Yahoo! stock drops like a rock.
This will leave Yahoo! vunerable & weak so either:
1. MSMonopoly can sweep in & get Yahoo! for a song.
2. Yahoo! be bought up by Google or others & making one less Online Search company to be a "threat" to MSMonopoly.
3. Yahoo! will close shop all together & MSMonopoly will get its' way in the long run.
Typical MS BS.
People need to read up on business strategy and market dynamics before slamming M$ for getting into new areas. There are SO MANY other things to ding microshaft about; wanting to get into new areas to save their dying, decrepit desktop monopoly is simply a desperate self-preservation tactic. We can't expect a dinosaur like ms to say, "Oh sh#t, everything has moved to the web, and SAS, and mobile devices... Ah screw it let's just whither on the vine".
My major dysfunction with MS is that they are attempting to re-invent themselves with a number of inferior, copycat, me-too products. They are attempting to take their armies of Rest&Vest bottom-feeders, who have collected at the RedWest campus after years of being weeded out of other divisions because of layoffs and poor performance, and have given them the mandate to "destroy Google". We're talking about some of the lowest-bandwidth people at the company (MSN), who now have to compete with some of the smartest people in the world (Goog). Of COURSE monkeyboy ballmer gave them a vote of "no confidence" and tried to go outside for talent. He's simply trying to keep his company alive...
I think most everyone agrees- MS is not the bad guy here. YAHOO is its own worst enemy. Why pay more than YAHOO is worth?
Long term strategy is superior to the shortsighted short term. In the long run Yahoo will be better off.
You guys always think Microsoft is the bad guy...
Seriously.... without Microsoft... Corporate world would still be chaotic and very lowtech....
I'm a Mac user and I love it but I really appreciate what Microsoft is doing.... Exploring technoly without bounds....
I think Microsoft was looking for a cheap deal, and Yahoo was simply circling the wagons.
Bill Burke
http://wirelessspeech.blogspot.com
Buying a bloated company and adding it to an extremely bloated company is no way to catch up to a huge, but still very agile Google.
Yahoo;s stock is still considerably higher than it was before MS made the offer and yahoo has some things brewing with Google that might not have been possible without MS stumbling around.
thanks to the incompetence of Ballmer, #3 MS is not only back to square one, they are still falling behind. They gave #2 Yahoo a much need breeze in their sails and Google is still stomping MS in terms of market share and worthwhile products.
Which is a shame since I think Google is more dangerous and detrimental to society then MS ever was.
This whole debacle just underscores how irrelevant MS has become and how they simply have nothing for the future, except more of the same, which has been shown over the past few years, doesn't work.
IMHO, even if the deal had gone through, the talent and technology of Yahoo would have been destroyed in the process.
The technology of Yahoosoft (PHP and Unix) would be discarded and replaced with .Net and Windows.
The talent of Yahoosoft (PHP developers) would abandon ship in favor of other job prospects.
Except for the value of the "Yahoo" brand name, Yahoosoft would become a worthless empty shell.
- by benjaminstraight July 14, 2008 4:42 PM PDT
- benjamin straight writes: This is all par for the course. Don't watch the ups and downs; see the bigger pic of the Microsoft deal emerging.
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