Micro-Hoo Talks Off Again (Or Are They?)

Today, Yahoo confirmed a Wall Street Journal report that its “discussions with Microsoft regarding a potential transaction — whether for an acquisition of all of Yahoo! or a partial acquisition — have concluded. The conclusion of discussions follows numerous meetings and conversations with Microsoft regarding a number of transaction alternatives, including a meeting between Yahoo! and Microsoft on June 8th in which Chairman Roy Bostock and other independent Board members from Yahoo! participated. At that meeting, Microsoft representatives stated unequivocally that Microsoft is not interested in pursuing an acquisition of all of Yahoo!, even at the price range it had previously suggested.”

So the deal talks were dead, right? Well, maybe not. Later this afternoon, Microsoft released a statement in which it hinted at an “alternative transaction” still in the works. Here’s the full statement.

June 12, 2008

Microsoft Corp. today issued the following statement:

“In the weeks since Microsoft withdrew its offer to acquire Yahoo!, the two companies have continued to discuss an alternative transaction that Microsoft believes would have delivered in excess of $33 per share to the Yahoo! shareholders. This partnership would ensure healthy competition in the marketplace, providing greater choice and innovation for advertisers, publishers and consumers.

“As stated on May 3rd and reiterated on May 18th Microsoft was not interested in rebidding for all of Yahoo!. Our alternative transaction remains available for discussion.”

What is going on here? Possibly a separate search deal with Yahoo. But my bet is that Microsoft is willing to wait it out for a full takeover, sort of like laying siege to Yahoo! Yahoo’s stock is already down 10% on today’s news. It would be down more if i weren’t for the rumors about an impending deal with Google.

If and when Yahoo delivers another underwhelming quarter, its stock should continue to fall–even with a Google deal. And then Microsoft can come back with another bid, probably a lower one, and take out the company.

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