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By Jennifer Yousfi
Yahoo! Inc. (YHOO) co-founder and Chief Executive Officer Jerry Yang sent a love note to shareholders yesterday (Thursday) explaining why the board of directors and management formally rejected Microsoft Corp.'s (MSFT) $44.6 billion hostile takeover offer.
In the letter, Yang outlined the reasons why he feels Microsoft's offer undervalues Yahoo's prospects including its 500 million users and lucrative advertising partnerships with eBay Inc. (EBAY), Comcast Corp. (CMCSA), AT&T Inc. (T) and over 600 newspapers. The letter is intended to quiet rumblings from shareholders who found Microsoft's offer of $31 per share for the struggling web company attractive.
There have been various reports that News Corp. (NWS) or rival Google Inc. (GOOG) may make a competing bid to thwart Microsoft. However, most analysts feel that the high-price Microsoft is willing to pay and the regulatory concerns involved with a merger will ward off out any other potential suitors.
For instance, a deal with News Corp. would be complicated by a $900 million multiyear agreement the media giant already has in place with Google. Google handles online advertising for the media giant's popular social networking site MySpace, a service Yahoo may be better suited to provide in the event of a tie-up.
"It's still at the fanciful rumor stage," Jeffrey Lindsay, an analyst with Stanford C. Bernstein & Co. told BusinessWeek. "We couldn't make the numbers add up. We don't feel lit looks credible."
Yang and the board clearly feel they did the right thing by rejecting Microsoft's offer, but others aren't so certain. The current regulatory climate mandates that boards put their shareholders' concerns first and some analysts feel the Sunnyvale, Calif.-based technology company should take another look at Microsoft's offer.
"Doing some alternative deal is almost sure to be of less value to shareholders," Clayton Moran, an analyst with Houston-based Stanford Group, told Reuters. "You would see all sorts of lawsuits - and they would be lawsuits with merit."
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