Posts Tagged ‘Dagen McDowell’

Micro-Hoo: Is Microsoft following the HP Playbook or the News Corp. Playbook?

February 12, 2008

Yesterday, I appeared on Fox Business News to talk about the latest and greatest soap opera in the tech industry–Microsoft’s courtship (or bear hug) of Yahoo!.

On the show with my former colleague from TheStreet.com, Dagen McDowell, I said that Microsoft may be inclined to sweeten its offer to Yahoo! A new offer would never come close to the $40 a share that some insiders say Yahoo!’s board is seeking but I thought it was possible that Microsoft could come up a few dollars–especially since reports have said that Micrsoft was willing to pay around $35 for Yahoo! before its latest disappointing quarter.

Now I’m not so sure about that. The reason is late yesterday Microsoft released a statement calling its bid “full and fair.” The remarks came in response to Yahoo’s earlier statement that Microsoft’s bid “substantially undervalues” the company. While Microsoft did not say $31 is its final offer, it is clearly playing hard ball.

The question now is this: Is Microsoft following the HP playbook or the News Corp. playbook? (Microsoft has said that it studied the HP-Compaq merger as part of its due diligence for putting together a Yahoo1 bid.) HP applied a massive charm offensive and grueling lobbying campaign to win over Compaq shareholders.

Rupert Murdoch, on the other hand, took over Dow Jones by giving the confused Bancroft clan a very sweet offer and then putting on the vice grips. Many analysts thought Murdoch would sweeten his offer to close the deal, especially since the Bancrofts held preferred shares in the company. But Murdoch held firm and quickly carried the day.

I don’t know the answer to this question. But after yesterday, it looks like Microsoft is leaning more and more towards the Murdoch playbook.

Now, don’t get me wrong. Yahoo! is no Dow Jones. The Silicon Valley superstar has fallen on hard times but it is not in a mature and declining business. And Yahoo! did not drive its business into the ground. It’s just competing against a superior competitor. The problem for Jerry Yang is that he has yet to convince shareholders that he has come up with a better vision to combining these behemoths. If he doesn’t, it’s hard to see how he can hold off Microsoft–or hit them up for more money.

We’ll probably get another major clue in the next few weeks if Steve Ballmer & Co. wage a proxy fight. Microsoft could ratchet up pressure on Yahoo’s board by taking its offer directly to shareholders and waging a proxy fight to oust Yahoo’s directors; it has until March 13 to nominate a new slate of directors. Today, though, the New York Post reported that “Microsoft has hired proxy solicitation firm Innisfree in anticipation of a proxy battle to replace Yahoo!’s board.”

Let the games continue…

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