Yahoo shares soar on new Microsoft takeover hopes

Oct 05, 2011 By MICHAEL LIEDTKE , AP Technology Writer
A visitor sits next to a laptop near the logo of Yahoo in Germany 2007. Yahoo shares surged Wednesday driven by speculation that Microsoft would lodge a new bid for the web giant, more than three years after being rejected.

Yahoo Inc.'s stock price soared more than 10 percent late Wednesday on hopes that its once-spurned suitor, Microsoft, will return with another takeover bid now that the struggling Internet company is mulling a possible sale.

Reuters reported late in the day that Microsoft Corp. is considering whether to make an offer, and that fed the takeover speculation that has swirled around Yahoo Inc. since it fired Carol Bartz as CEO five weeks ago.

The story cited unnamed sources that Reuters said included a high-ranking Microsoft executive saying there's disagreement within Microsoft on whether it makes sense to pursue Yahoo again more than three years after being rebuffed.

A Microsoft spokesman declined to comment.

Yahoo's shares reached $16.15, their highest point since Bartz's Sept. 6 ouster, before retreating to close at $15.92, an increase for the day of $1.46, or 10.1 percent. They fell 46 cents after hours.

Microsoft is widely viewed among investors as the most tantalizing candidate to buy Yahoo because the world's largest software maker has the cash to pull it off and a history with its rival that makes a takeover seem like a realistic scenario.

But making a case for Microsoft to buy Yahoo still requires wishful thinking. That's partly because Yahoo and Microsoft are now bound together in an Internet search partnership that gives Microsoft less incentive to buy Yahoo outright. Microsoft also is facing a challenge with personal computer sales slowing that could make the headaches that would accompany a Yahoo acquisition even less attractive.

Despite long-running problems, Yahoo still holds some allure because its brand remains among the best-known on the Internet. Its website attracts a worldwide audience of nearly 800 million, although its users are sticking around for shorter periods of time and hanging out more frequently at Facebook.

Various buyout firms and Internet companies have been identified has potential suitors since Yahoo co-founders Jerry Yang and David Filo sent an email to employees last month acknowledging several interested buyers had contacted the company, which is based in Sunnyvale, Calif.

Yahoo has hired investment bankers Goldman Sachs Group Inc. and Allen & Co., to advise its board as it fields those inquiries.

Filo's and Yang's note said Yahoo's board's strategic review could last months while the company also searches for a new CEO. In the meantime, Tim Morse, whom she hired as Yahoo's chief financial officer, is running the company. Bartz bluntly said not long after Yahoo hired her in 2009 that the company probably should have accepted Microsoft's original takeover offer.

Determined to narrow Google Inc.'s dominance of the lucrative search market, Microsoft had offered $31 a share for Yahoo in early 2008. It eventually sweetened the bid to $33 per share, or $47.5 billion, but withdrew the offer when Yang held out for more.

Yahoo's shareholders were incensed, and its board scrambled to justify why it didn't seize the opportunity to sell at a price the stock hasn't come near ever since.

Most analysts believe Yahoo would jump now at the chance to sell to Microsoft now, given that its revenue has been declining instead of growing as the board had promised. Any buyer probably would be able to pay much less than Microsoft once offered.

Analysts have estimated Yahoo could fetch $18 to $22 per share.

The question now is whether Microsoft is as attracted to Yahoo as it was three years ago. As part of its turnaround efforts, Yahoo hired Microsoft to run its search engine. That 10-year deal gives Microsoft 12 percent of the revenue from ads that run alongside Yahoo's search results and, more importantly to Microsoft, valuable insights into the interests of Web surfers.

Rather than bid by itself, Microsoft could team up with one of Yahoo's other potential suitors. That list includes Chinese Internet company Alibaba Group, whose CEO last week said it's "very interested" in buying Yahoo, and it includes the buyout firms Silver Lake Partners and Providence Equity Partners, Silicon Valley venture capital firm Andreessen Horowitz, Russian investment firm DST Technology and even another fallen Internet star, AOL Inc.

Microsoft shares gained 52 cents, or 2 percent, to $25.86 in Wednesday's late trading.

Explore further: US newspaper industry revenue fell 2.6 pct in 2013

not rated yet
add to favorites email to friend print save as pdf

Related Stories

Silver Lake, others eye Yahoo!: reports

Sep 16, 2011

Private equity firm Silver Lake Partners has approached Yahoo! about making a bid for the struggling Internet company, according to newspaper reports.

'Multiple parties' interested in Yahoo!: memo

Sep 24, 2011

Yahoo! is fielding inquiries from "multiple parties" who have expressed an interest in the struggling Internet company, officials said Friday in a memo sent to employees and obtained by AFP.

Bartz blasts Yahoo! board

Sep 08, 2011

Fired Yahoo! chief executive Carol Bartz has responded to her dismissal with a characteristically salty blast at the board of directors of the Internet company.

Yahoo! shares sink on Alibaba tensions

May 13, 2011

Yahoo! shares extended their slide on Friday amid tensions with Alibaba Group, the Chinese e-commerce giant in which the California Internet company holds a large stake.

Activist buys up stake in Yahoo, slams board

Sep 08, 2011

(AP) -- An activist investment fund disclosed Thursday that it has bought a 5.2 percent stake in troubled Web portal Yahoo Inc. and called for sweeping changes to the board.

Recommended for you

Airbnb rental site raises $450 mn

5 hours ago

Online lodging listings website Airbnb inked a $450 million funding deal with investors led by TPG, a source close to the matter said Friday.

US venture investments highest since 2001 (Update)

Apr 18, 2014

Funding for U.S. startup companies soared 57 percent in the first quarter to a level not seen since 2001, as venture capitalists piled more money into a growing number of deals, according to a report due out Friday.

User comments : 0

More news stories

Airbnb rental site raises $450 mn

Online lodging listings website Airbnb inked a $450 million funding deal with investors led by TPG, a source close to the matter said Friday.

Health care site flagged in Heartbleed review

People with accounts on the enrollment website for President Barack Obama's signature health care law are being told to change their passwords following an administration-wide review of the government's vulnerability to the ...

Under some LED bulbs whites aren't 'whiter than white'

For years, companies have been adding whiteners to laundry detergent, paints, plastics, paper and fabrics to make whites look "whiter than white," but now, with a switch away from incandescent and fluorescent lighting, different ...

Impact glass stores biodata for millions of years

(Phys.org) —Bits of plant life encapsulated in molten glass by asteroid and comet impacts millions of years ago give geologists information about climate and life forms on the ancient Earth. Scientists ...

Researchers successfully clone adult human stem cells

(Phys.org) —An international team of researchers, led by Robert Lanza, of Advanced Cell Technology, has announced that they have performed the first successful cloning of adult human skin cells into stem ...