Yahoo!'s Doing Better and Better after Rejecting Microsoft

Rejecting Microsoft’s unsolicited bid has put Yahoo! in the best spot it could be in, and at the same time, in a very sticky situation. By having the power to refuse Software giant MS, it showed its stockholders that it is a company that has a future ahead, well crayoned, and that the demeaning offer that the Redmond-based company tried to shove in Yang’s hand is not by far what the board would sell.

Selling itself short is the actual reason that the WSJ reported Yahoo! would refuse the bid, as analysts value the shares at a level closer to $40+. In the meanwhile, seeing the support that stock holders throw in, lifting the value of a share to an actual $29.47, up from Friday’s $29.20, the Sunnyvale-based company is trying to shop itself around, not eliminating a possible merger with AOL, Disney or even outsourcing its search and advertising business to Google. If it hopes to force Microsoft into raising the bid, nobody except the board members know.

If it doesn’t manage to do that, and quick, it will most likely be subject to a declaration of war. Steve Ballmer, CEO of Microsoft, announced on February the 4th that the offer was very generous and that his company would go the entire length to acquire Yahoo! if it is rejected. The friendly version I've described above, with raising the bid at ~$40 and a kiss on the cheeks. The not so friendly variant is that the Redmond-based company goes hostile, with issuing a tender offer directly to Yahoo! shareholders or by mounting a proxy battle to nominate its own slate of directors to replace the board at Yahoo!, as Market Watch assumed.

Right now it's a waiting game, a cat and mouse game, if you will, and what matters is how much patience Microsoft has. Will it force Yahoo!'s hand and quickly raise its offer by $12Bn or wait until the only possible variant is the 'war'?