Microsoft’s next move in the Microhoo merger.
If you aren’t aware of a recent bid by Microsoft to buy Yahoo, this article certainly wasn’t meant for you. However, if you have, you may also know that Microsoft pulled its offer last weekend.
Some speculate that Microsoft will try to install a more take-over friendly board in June. Some speculate that Microsoft is letting Yahoo’ stock fall so they can retry later at a better price.
Both of these are incomplete speculations; after all, if the offer is off the table, how does microsoft install a new board? And how does a dip in yahoo’s stock price help microsoft? After all, if they put the offer back on the table, the stock prices will immediately rise again.
The answer to both of those questions might be the following idea, which so far I haven’t seen on any blogs:
In the movies, the CIA sometimes has ‘front companies’ - companies secretly owned by the CIA through a long line of other front companies and individuals, for business. The idea is not totally unheard of; plenty of corporations are actually conglomerates of hundreds, sometimes even thousands, of smaller (but very real) companies. if you were to map out the ownership of all those subcompanies it would make quite a picture.
Microsoft can have many front companies if it wants. And those front companies can buy yahoo stock. At its current lowered price. Microsoft is also rumoured to be behind SCO’s attack on Linux; its far less of a leap to consider microsoft leaning on friendly companies to buy some yahoo stock as well.
Because at the end of the day, buying yahoo is all about controlling some stock. The more stock microsoft controls (either through front companies or through friends), the less of a percentage of the rest of the yahoo-stock-owning world needs to be convinced that microsoft is the future for Yahoo. The stock holders decide the board. For hostile takeovers, Microsoft needs to control more than 50% of the stock. That’s a lot easier to get to if 25% of all yahoo stock is already under your control.
I’m not streetwise enough in the finance sector to actually figure out if microsoft has front companies and if those are buying yahoo stock right now. However, if you have a vested interest in the Microhoo future, that’s where I’d look to see if Microsoft threw in the towel or if its just switching tactics.
alper http://www.alper.nl
May 7th, 2008I thought this analysis by Marc Andreessen of Microsoft’s options was pretty illuminating. Maybe he could give a definitive answer to the likelihood of this option.
Cristiano Betta http://cristianobetta.com/
May 8th, 2008Bill Gates “announced” today that MS wasn’t going to pursuit a hostile takeover. Now, he isn’t the official spokesperson for MS anymore so he could be bullshitting.
Reinier http://reinier.zwitserloot.com
May 8th, 2008Proves nothing though.
If microsoft wants to enter the web market by itself, then saying this to focus the company is a good move. If people believe him, it should also improve Microsoft’s stock price, as buying something tends to depress the stock of the buyer, and the suspicion that X might happen causes the stock price to undergo the same effect as X, but on a smaller scale.
If microsoft wants to go on a sneaky stock buying spree, then microsoft’s primary goal is to depress yahoo’s stock price. Saying you no longer want to buy anything is a fine way to do this.
Either way, gates would say that. On the other hand, if he wants to convince the Yahoo stockholders to stage a revolution without Microsoft’s help and upset or threaten Jerry Yang and co. so that an offer from Microsoft is more likely to be accepted down the line, then this would have been the wrong move. So it does tell us something: Either A) Microsoft really really no longer cares about Yahoo, or B) They are trying a sneaky move, or C) They are not acting according to logic that makes sense to normal humans.
Remember, large corporations do not act rationally. Do not exclude C too quickly