Yahoo! Inc., the Web company that spent three months fighting a takeover by Microsoft Corp., fell 21 percent in early trading after the software maker scrapped the bid because executives failed to agree on the price.
Citigroup Inc. and ThinkPanmure LLC analysts cut their ratings on Yahoo's stock to ``sell'' after Microsoft withdrew its offer. Microsoft said this weekend it walked away when Yahoo demanded $37 a share after the $44.6 billion bid was raised by about $5 billion to $33 a share.
The move leaves Yahoo Chief Executive Officer Jerry Yang to prove he can revive sales and the share price by keeping the company independent. Sunnyvale, California-based Yahoo, owner of the No. 2 search engine, fell 32 percent on the Nasdaq in the year before Microsoft's offer. Bigger rival Google Inc. expanded revenue more than three times faster than Yahoo last quarter.
``Yahoo's stock is going to crater, and Yahoo shareholders are going to go bang on everyone's head and say, `How does this benefit me?''' said Richard Williams, an analyst in Short Hills, New Jersey, at Cross Research who advises investors to hold on to Microsoft shares and doesn't own any.
Yahoo fell $5.96 to $22.71 in trading before exchanges opened after closing at $28.67 on the Nasdaq Stock Market on May 2. Redmond, Washington-based Microsoft, the world's biggest software company, rose $1.66, or 5.7 percent, to $30.90, while Google advanced $18.71 to $600.
Pressure
``Yahoo is going to be under a lot of pressure,'' said Peter Falvey, managing director at Boston-based technology-merger adviser Revolution Partners. ``A lot of shareholders are going to say, `Hmm, maybe we overreached.'''
Microsoft CEO Steve Ballmer and deputy Kevin Johnson met May 3 in Seattle with Yahoo co-founders Yang and David Filo, two people familiar with the talks said. Yang and Filo refused to accept less than $37 a share and flew back to California. Ballmer called Yang to inform him of the decision just before it was announced, the people said.
Yahoo Chairman Roy Bostock reiterated over the weekend in a statement that Microsoft's offer wasn't enough. The company will continue to expand search advertising sales while improving its display advertising business, he said.
``With Microsoft's withdrawal, we'll be better able to focus our energy on growing our industry leadership and maximizing value for stockholders,'' Yang, 39, said yesterday in a blog post. ``We'll continue to execute on our plan.'' He also said the company will keep exploring options to increase its value.
Yang's Stance
Yang had argued the company's rank in the U.S. search market and its Asian operations warranted a higher bid. He considered a combination with Time Warner Inc.'s AOL and tested advertising software from Google. Last week, a person familiar with the matter said Yang might agree to a broader deal with Google.
``Both sides reported that the trial went very well,'' Jeffrey Lindsay, an analyst at Sanford C. Bernstein in New York, said yesterday in a Bloomberg Television interview. ``It would strongly suggest to us that they do have something in the works with Google.'' Bernstein rates Yahoo shares ``market perform.''
Ballmer, 52, had set an April 26 deadline for Yahoo to come to terms and as the days passed, it seemed possible he would take the offer straight to Yahoo investors. Over the weekend, Ballmer said he won't do that. That would result in a ``protracted proxy contest,'' and Yahoo indicated it would make decisions that Microsoft would find ``undesirable,'' Ballmer said.
Falling Behind
If Yahoo agrees to use Google's search advertising, it would lose its own ad customers and engineers who work in that field, Ballmer said.
Yahoo already had a ``poison pill'' anti-takeover defense and a severance plan that would compensate any employee displaced by an acquirer.
Yahoo has failed to keep pace with Google. While Yahoo's sales climbed 14 percent last quarter, Google posted growth of 46 percent. Yahoo and Microsoft remain a distant second and third behind Mountain View, California-based Google in Web searches.
UBS AG's Heather Bellini, the top-ranked software analyst by Institutional Investor magazine, has said that Microsoft could come back and buy Yahoo later on if it walked away this time. Microsoft may approach Yahoo again in three to six months, said Robert Breza, an RBC Capital Markets analyst in Minneapolis.
Oracle Corp., the third-biggest software maker, initially abandoned its bid for BEA Systems Inc. after BEA asked for 24 percent more than Oracle's $17-a-share bid. The two companies agreed to the buyout three months later at $19.38 a share.
``To say we are disappointed is an understatement,'' William Morrison and Robert Coolbrith at New York-based ThinkPanmure wrote in a report yesterday. Rejecting Microsoft's offer is ``likely to go down as one of the more destructive decisions for shareholder value in the history of Internet stocks.''
No comments:
Post a Comment