It certainly appears that the Microsoft deal, while dead for now, has a chance of springing back to life. Although Yahoo shares dropped about 15% on the first day of trading after Microsoft’s CEO Steve Ballmer announced that they had withdrawn their bid, the stock was still trading about $5 per share higher than when Microsoft started the courtship three months ago. Microsoft’s shares dropped a little, indicating that investors want to see the software giant do something to help them believe that it is relevant going against the online search king Google.
Yahoo founder Jerry Yang made it clear that he is open to a Microsoft merger, but that he believes Yahoo is worth far more then the $44 billion that Microsoft offered. Still, it appears that he and the board of directors will have a lot of explaining to do when they meet for the annual shareholders meeting in July. Microsoft, on the other hand, has $50 billion in the bank that would be much better utilized expanding their business if they can get Yahoo to change their tune or if they choose to go after some smaller purchases like AOL, MySpace, or Facebook. One way or another, Microsoft needs to do something to close the gap between them and Google in the market for online advertising dollars.
Yahoo! chief on why the Microsoft bid failed (Rediff News)
Microsoft’s Google challenge remains (Globe and Mail)
What Should Microsoft Buy Instead? (Barrons)
I suspect that the move by Microsoft is a ploy that could easily turn into a spending spree if they decide to purchase some of the smaller properties that are available. If Yahoo’s intransigence continues, I believe that Microsoft will turn to greener pastures by snapping up established players like AOL and MySpace, as well as smaller companies as speculation in the “next wave,” whatever form that wave may take. Do you think that Microsoft’s end to merger talks is a serious move or a tactic to get Yahoo to lower their asking price?