14 DAY TRIAL // On January 31, 2008, Microsoft set its acquisition machinery in motion and pointed it straight at Yahoo. Following almost two years of private negotiation that have not resulted in a conclusive effect, the Redmond company went public with a takeover bid which was interpreted to being anything from unsolicited to hostile. The acquisition proposal for Yahoo reportedly has the blessing of Microsoft Chairman Bill Gates, but it is the brain child of Chief Executive Officer, Steve Ballmer, representing a shift in the company's traditional strategy of only indulging in small acquisitions and relying on its own technology to grow on markets adjacent to the core desktop business.
And yet on February 1, 2008, Microsoft went public with a $44.6 billion in cash and stock takeover bid for Yahoo. Ballmer argued that the Redmond company felt the need to go public with the proposal due to the relevance of the bid to Microsoft's and Yahoo's shareholders, as well as a fighting fire-with-fire method designed to shield it from selective disclosures. Yahoo's Board of Directors only stated that it would carefully analyze the unsolicited proposal, and despite the fact that the Sunnyvale company was reported to deliver an answer at the end of the past week, it failed to do so.
However, although unconfirmed by both parties involved, that have declined to comment, this week appears to be bringing a "no" from Yahoo to the potential Microsoft marriage. But in the end, the refusal might not be anything more than just an invitation to negotiate. Microsoft initially offered a 62 percent premium to the trading price for Yahoo at $31 per share, or close to $45 billion. Yahoo instead seems to go for over $40 per share, adding no less than $12 billion to the initial Microsoft offer. In this context, it is by no means game over for Microsoft and Yahoo, but it remains to be seen if the Redmond company will go up to approximately $60 billion just to add a failing Web 2.0 company to its arsenal against Google. In the light of the acquisition proposal, Microsoft's share dropped from $32.60 to $28.56, over 13%, in a single week, resulting in an overall $38 billion loss for the company's shareholders. But, on February 1, 2008, Ballmer said that a negative answer from Yahoo would not deter it from its path.
"Due to the importance of these discussions and the value represented by our proposal, we expect the Yahoo! Board to engage in a full review of our proposal. My leadership team and I would be happy to make ourselves available to meet with you and your Board at your earliest convenience. Depending on the nature of your response, 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," reads Ballmer's veiled threat. "We believe this proposal represents a unique opportunity to create significant value for Yahoo!'s shareholders and employees, and the combined company will be better positioned to provide an enhanced value proposition to users and advertisers. We hope that you and your Board share our enthusiasm, and we look forward to a prompt and favorable reply."