Yahoo: Will any other suitors come a-courting?
Google Inc. has reportedly shown an interest in working with Yahoo Inc. to ward off a potential takeover bid from Microsoft Corp., and while other companies have also contacted Yahoo, it’s unlikely that any of them could beat Microsoft’s offer, analysts said today.
In a statement Friday, Yahoo Inc. said that the company and its board will evaluate Microsoft Corp.’s $44.6 billion offer “carefully and promptly in the context of Yahoo’s strategic plans and pursue the best course of action to maximize long-term value for shareholders.” A Yahoo spokeswoman today said that the company wouldn’t comment beyond what was said in the statement.
However, Reuters reported that a number of companies have been in contact with Yahoo, although it was uncertain whether any alternative offers had been made. But industry observers say that while some companies might be interested in a deal with Yahoo, it’s unlikely that any could beat Microsoft’s offer.
Last December, Kathy Sharpe, CEO of Sharpe Partners LLC, a New York-based marketing and consulting firm, wrote in a blog post of a fantasy acquisition that involved a takeover bid for Yahoo by Apple Inc.
Last week, someone told Sharpe that an Apple bid for Yahoo was about as likely as the New York Giants beating the 18-0 New England Patriots and winning Super Bowl XLII.
Even though that fantasy became a dream come true for the Giants, Sharpe doubts her Apple fantasy alternative to Microsoft’s offer for Yahoo will ever play out.
“I don’t think under these circumstances anyone wants to get into a bidding war with Microsoft,” Sharpe said. “The price is so high, and even if [Yahoo's CEO] went to [Apple CEO] Steve Jobs, and even if they had even been talking about something that could work out as a way for the portal part of Yahoo to become part of what happens with iTunes, in some sort of holistic way, that’s not what’s going to stop [Microsoft's bid].”
Sharpe said she didn’t think Yahoo’s stockholders and its board would let CEO Jerry Yang say no to Microsoft’s offer of $31 per share, a 62% premium over Yahoo’s Thursday closing price. And she said that’s why Microsoft came out with its high bid — to stop all conversation.
However, Sharpe’s not so sure a Microsoft-Yahoo deal would solve Microsoft’s Google problem.
“I think it creates a bigger problem for Microsoft,” she said. “They have to now integrate with a very large portal, and they don’t know how to do a portal themselves, and it’s unclear whether Yahoo does either. They have two massive sales forces and two search engines that have to be integrated. It’s possible when they come out of box again, they’ll be a pretty impressive force, and they’re going to push the ad market around a bit, but they’re not going to take search share from Google. And in the six months it takes them to get this deal done and finished and through the hoops and the companies put together as one, Google will march on, and we know what that’s like.”
Allan Krans, an analyst at Technology Business Research Inc. in Hampton, N.H, said he doesn’t think there are a whole lot of options out there for Yahoo unless it wants to continue on as an independent entity.
The question is, said Krans, “Who’s interested in online advertising and who sees it as a strategic market for them, and who’s large enough to complete a transaction of that size? So when you look at those two areas, the potential suitors are fairly limited. Google would be interested, but no way would it pass the regulatory test, since they already control such a large piece of the market. So when you look outside of Microsoft, you have IBM, but they don’t see the Internet advertising market as strategic for them. They’re more interested in focusing on software and the technology.”
As for a bid by Apple, Krans also doubts that would happen. Although Apple has the balance to make a competitive bid, he said, the company hasn’t shown any interest in getting into the online advertising market, which is limited to companies that have already invested in it.
“There’s a huge data center investment, and it costs a lot of [money] to just get started in the market,” Krans said. “Over the past couple of years, Microsoft has already invested quite heavily — you’re talking billions of dollars — into the online advertising market.”
Krans said Microsoft is committed to the online ad market because of its past investments, which are investments and commitments Apple hasn’t made.
“Apple doesn’t have a large amount invested, and they’re not already in the market, and they don’t really have an interest in driving growth there, so I think it’s a difficult proposition,” he said.
However, David Ferris, president of San Francisco-based Ferris Research, said there are lots of companies with substantial amounts of money that would be interested in making a run at Yahoo.
There are established print media companies, such as Rupert Murdoch’s News Corp., that could be looking for alternatives to their businesses and that could be potential suitors for Yahoo, Ferris said. Big telecommunications companies that might be interested in getting out of their underlying telephony businesses, such as AT&T Inc. and British Telecom, could be interested as well, he added.
