Yahoo Stocks Drop 18% After Microsoft Withdrawal

May 5th, 2008 at 12:00 am


From the New York Times :

"At 12:20 p.m., Yahoo’s shares were off about 14 percent, at $24.65, after closing at $28.67 on Friday — a day when the companies were said to be escalating their talks on a merger. The shares recovered some ground after losing about 20 percent at the start of Monday’s trading."

Jerry Yang was willing to sell Yahoo for $37 a share, $4 up from Microsoft’s final offer. Now that Microsoft has backed down , Yang has to steer his company and prove to his stockholders that Yahoo is indeed worth at least $37 per share.

In the Yahoo camp, there were mixed emotions when the Microhoo merger came to an end. Yang and his team felt victorious but some of the stockholders big and small were kind of disappointed.

"I don’t believe that Jerry Yang as a founder, as someone who is emotionally attached to the company, was really looking out for my interest as a shareholder,” said Darren Chervitz, co-manager of the Jacob Internet Fund, which owns about 150,000 shares of Yahoo. “I don’t think anything Yahoo puts out there is going to be comparable with what Microsoft was offering."

Yang and the Yahoo board always believed that the Microsoft offer of $33 per share which would have amounted to about $48 billion undervalued the company and that Yahoo was better off partnering with other companies to better shareholder interests. In a statement released by Yahoo, “We remain focused on maximizing shareholder value and pursuing strategic opportunities that position Yahoo for success and leadership in its markets.”

This may also be true and Yahoo may be able to reach the $37 per share by outsourcing their search platform to, of all companies, Google. Yahoo and Google or Yahoogle as many would call them, have recently been on some test runs with Google supported ads on Yahoo searches.

What will happen to Yahoo really depends on how much its stock will continue to plunge this week and then we’ll all realize which deal Yahoo should have really taken.