This Microsoft pursuit of Yahoo--or Yahoo's attempt to run away--is getting old quick. Yahoo thinks it's worth more than $31 a share, but can't force Microsoft's hand because it can't find white knights. Microsoft doesn't want to budge from what it figures is a fair offer. Can we just get this over with already?
What will break this stalemate (Techmeme)? Let's ponder the options.
- $34: An offer of $34 a share for Yahoo would likely seal a deal. Citigroup analyst Mark Mahaney says: "We believe that a Yahoo sale to Microsoft--at a price likely higher than the initial $31 bid--is the most likely outcome. While regulatory risk may be material, we continue to believe that limited combined market share allows the deal to go through.'
- A deteriorating economy. Yahoo says its first quarter results are fine and its 2008 outlook is in tact. If things unravel quickly, Microsoft can wait a few quarters and $31 may look like a swell offer.
- Some sort of deal with anyone other than Microsoft. Microsoft isn't going to walk away from Yahoo, but there's nothing on the horizon that will get the software giant to up its bid. Enter Time Warner. Any credible deal with Time Warner would force Microsoft's hand. For now, however, Yahoo and Time Warner have nothing credible to move Microsoft.
- Yahoo executes. There's a possibility that Yahoo could top its optimistic projections going into 2010. If Yahoo can string together a few quarters of upside surprises Microsoft would have to up its price.
- Microsoft's inability to make money on online advertising. Conversely, Microsoft's online unit is the weakest sister in the house. Should Microsoft fail to make its online businesses profitable it may figure that a few extra bucks tossed in Yahoo's direction is worth the effort.