Entry for February 14, 2008

Yahoo - what if (or woulda shoulda)

With its days as an independent company seemingly numbered, Yahoo must be wanting a few do-overs on the M&A front these days. Last year’s purchases of online ad firms Right Media and BlueLithium seem astute, though perhaps too little, too late. And let’s not forget successful photo-sharing site Flickr. Still, here is a look at some of Yahoo’s M&A missteps over the years.

Google. Probably, the do-over Yahoo most fantasizes about. Yahoo had an opportunity to buy Google in 2001. Over dinner, Google co-founders Sergey Brin and Larry Page and former Yahoo CEO Terry Semel discussed a deal. Alas, Brin and Page wanted $3 billion to sell and Yahoo walked away, a $162 billion mulligan by today's prices.

By 2002, Google had gone from Yahoo partner to Yahoo rival. In response to Google’s encroachment, Yahoo snapped up these two businesses to fight back. Search engine Inktomi replaced Google for Yahoo’s search technology. Overture placed ads on Web pages. The problem was that Inktomi and Overture did not produce results as good as Google’s.

Yahoo paid almost $3 billion in 1999 for GeoCities, a pioneer of social-networking on the World Wide Web, only to have the social-networking site whither away under its control. As one person close to the situation told Deal Journal’s Dennis K. Berman in this recent column: “Had they done things right with GeoCities, there would be no Facebook, YouTube or MySpace.”

Source:Wall Street Journal

Microsoft Corp said on Monday that Yahoo Inc's rejection of its initial offer to buy the company was "unfortunate," but it does not change its belief in the merits of its proposal.

"As we have said previously, Microsoft reserves the right to pursue all necessary steps to ensure that Yahoo's shareholders are provided with the opportunity to realize the value inherent in our proposal," Microsoft said in a statement without specifying what its next course of action would be.

In response to Microsoft's statement, a Yahoo spokesman said it stood by its earlier letter on Monday from the Sunnyvale, California company's board that the Microsoft proposal undervalues Yahoo.

Source: Reuters

In the history of internet business, Yahoo may have come to the point of no return. Now that the Microsoft deal is on hold ( because what Microsoft wants, microsoft gets, takes, or appropriates)dont count them out. Meanwhile, Rupert Murdoch is hinting of a deal after Yahoo spurned Microsoft's $44 billion dollar bid. Rupert Murdoch's News Corporation is now reportedly holding talks with the website pioneer. According to the Wall Street Journal, News Corp is considering merging all of its web interests with Yahoo, including the popular social networking site MySpace.

Under the supposed deal, Yahoo would have to give News Corp 20 percent of its shares while allowing it to remain independent.

Earlier, Yahoo executives rejected Microsoft's offer saying the takeover bid grossly undervalued its brand, audience, investments in advertising platforms and future growth prospects, free cash flow and earnings potential.

My opinion: If this News Corp deal goes, 360 is doomed. it would make no sense to continue a money loser like 360 when they could reap the rewards of migration of 360 users to MySpace...