Ballmer gives Yahoo three-week ultimatum (updated)

Microsoft is growing impatient. Two months after the company’s $44.6 billion bid to take over Yahoo, Microsoft CEO Steve Ballmer has sent a letter to Yahoo’s board of directors offering an ultimatum. As eWeek reports, the ultimatum stipulates that Microsoft will initiate a hostile takeover if Yahoo doesn’t accept a deal within three weeks.

Ballmer’s letter states tersely, “If we have not concluded an agreement within the next three weeks, we will be compelled to take our case directly to your shareholders, including the initiation of a proxy contest to elect an alternative slate of directors for the Yahoo board.” Ballmer goes on to say that, should Microsoft attempt a hostile takeover, that course of action will also have an “undesirable impact on the value of your company from our perspective.”

Yahoo formally turned down the deal in February on grounds that Microsoft was offering too little. Since then, the web company has been on hunt for an alternative suitor, but it hasn’t found one with the brass to attempt outbidding Microsoft. Ballmer addresses Yahoo’s search in his letter, saying that although Yahoo has been seeking alternatives, Microsoft has seen “no indication that you have authorized Yahoo management to negotiate with Microsoft.” Ballmer also says the initial offer is still attractive in light of current economic conditions and Yahoo’s declining “search and page view shares.”

Update: Yahoo CEO Jerry Yang and Chairman Roy Bostock have responded to Ballmer with a lengthy letter. They conclude with the following:

We are open to all alternatives that maximize stockholder value. To be clear, this includes a transaction with Microsoft if it represents a price that fully recognizes the value of Yahoo! on a standalone basis and to Microsoft, is superior to our other alternatives, and provides certainty of value and certainty of closing. Lastly, we are steadfast in our commitment to choosing a path that maximizes stockholder value and we will not allow you or anyone else to acquire the company for anything less than its full value.

In the letter, Yang and Bostock also attempt to highlight Yahoo’s juicy future prospects, and they say stockholders agree Microsoft’s offer “substantially undervalues” their company.

Comments closed
    • CScottG
    • 12 years ago

    The basis of Yahoo’s worth principally is NOT technological, rather its due to its user base.

    Yahoo’s user base is around at MOST 130 million users for any given month. Of course most of that figure for the next month will be the very same users.

    Google is definitely cutting into Yahoo’s user base as time goes on. Moreover there is increasing competition from all manner of other competitors.

    Given truly adequate development of a competing product (say an absurd expenditure of 1 billion for software and another 4 for hardware). That would leave almost 40 billion to spend on various adds to lurer customers from Yahoo.

    Lets see 130 million X 10 = 1.3 billion

    1.3 billion X 10 = 13 billion

    13 billion X 3 = 39 billion

    That means that 10 times 10 times 3, or 300 bucks could literally be GIVEN to each potential customer for them to “switch” to the newer MS system.

    A far greater potential however would occur if they simply had a 1 million dollar lottery for users every *DAY* for inducement (i.e. use the service for at least 5 minutes a day and your entered). 365 million a year in pay-out would barely scratch the surface on THE INCOME GENERATED BY 40 Billion at even a very low interest rate. (i.e. Just a pitiful one percent rate of return would cover the cost.)

    Is Ballmer an idiot: YES!

    • d0g_p00p
    • 12 years ago

    I thought hostile takeovers were illegal.

      • clone
      • 12 years ago

      nope, hostile means going after the shareholders to bounce out the board… in effect steal the company…. it’s messy and it will take longer while likely costing more….. but it’s possible.

      I doubt they’ll manage it but you never know.

    • MadManOriginal
    • 12 years ago

    I find Yahoo finance to be fairly useful. I also like the idea of more companies in the general portal space just to keep some options. Also my main email which I’ve had for 10 years is a yahoo account, I’d hate to lose that :/

      • Buub
      • 12 years ago

      Agreed, plus Yahoo movies is the best movies site I’ve used.

      Yahoo search is nearly as good as Google. It’s not as horrible as people are making out to be. For example, it’s not Live search. *shudder*

      Plus Yahoo has a huge amount of marketing muscle. They are bigger than Google in that arena. That’s a lot of advertising money.

    • Krazeee
    • 12 years ago

    I’m not exactly pro MS, but Yahoo sounds like a bunch of whiny turds.
    “Waahh, give us moooore, waaah, Suzie got more than meeee”
    The way Yahoo’s market is going, they should be grateful that a company with pockets deep enough as MS is willing to take on their assets. Obviously nobody else is bothering to do so. You think they’d get a clue when their stocks jumped /[

      • clone
      • 12 years ago

      first off Yahoo isn’t dying….. sigh why is it if your not a monopoly you must be dying.

      MS wants many parts of Yahoo because all of Yahoo is profitable… and more notably it’s entrenched/established….. they aren’t as big as Google but Yahoo isn’t losing money.

      to say Yahoo is whining indicates a little ignorance in the way of business and the corporate obligations to shareholders, in essence if Yahoo’s board sells the company for too little they will be accountable for screwing over the shareholders…… the legal obligations are inherently in maximising profit.

      Google makes mountains of ad revenue off searches directly because of the popularity of it’s search engine but in most every other aspect they have been mediocre….. that said Google has seen the vision of OS less PC’s destined to be our future, Microsoft has no answer atm… and how will they survive with no OS to sell or to abuse their monopoly with.

      Microsoft is a ways behind with a minimal presence and attempting to buy a much larger one without going through all of the hoops and ladders, additionally after some analysis they must have concluded that it’d be cheaper and quicker while less problematic to buy Yahoo….. also Yahoo has the culture and mentality that isn’t constrained which could aid MS in moving forward.

      MS’s success was first in establishing a mainstream intuitive OS then once adding it’s own copy’s of other ppl’s innovations they would make others innovations inconvenient to use in their Operating system…. in a nutshell abuse their monopoly.

      but what happens when that carpet is pulled from under your feet and it’s all headed to open source and free / rented operating systems the same way you rent your internet access…. start to see the picture?

    • Forge
    • 12 years ago

    Nice company you got there … Be a shame if some flying chairs were to happen to it.

    • pogsnet
    • 12 years ago
    • Hattig
    • 12 years ago

    How can Yahoo! be worth $44,600,000,000?! Are their profits, assets and potential so high that this is a reasonable price? I can see potential in smaller companies being bought by big companies, but Yahoo! is already well established and has fingers in many pies.

    Then again, I see simple price comparison websites being valued in the billions, and I think that it is madness. I guess the commission on referral mounts up when you have millions of people using you.

    I guess I haven’t really been following Yahoo!’s business dealings and services really, so I don’t know all the stuff they’re doing, so maybe it isn’t that far off a reasonable price. Clearly the Yahoo! people think they’re worth more because of future offerings they have in the pipelines…

      • CasbahBoy
      • 12 years ago

      I think Microsoft is looking at it like this: they’re not just buying Yahoo. They’re buying their userbase as well. At least, that is how it looks on paper. If they make too many changes, a surprising number of people might just jump ship.

      • BKA
      • 12 years ago

      l[

    • herothezero
    • 12 years ago

    Yahoo’s full value? They don’t have any value. This is just such a bad deal…

    • ssidbroadcast
    • 12 years ago

    “This is your last chance Jabba. Free us, or die.”

      • Kraft75
      • 12 years ago

      Ballmer: “Uuuh-huuuuuh-huuh; Aah-haaah-haah.”

        • eitje
        • 12 years ago

        nice.

        • ssidbroadcast
        • 12 years ago

        lmao you’re win.

    • no51
    • 12 years ago

    I hope Microsoft backs out of this deal. That way Yahoo stocks will plummet and I can say “I told you so.”

      • Heiwashin
      • 12 years ago

      That would be comical.

    • Klopsik206
    • 12 years ago

    For one I’d love MS buys yahoo.
    $44,6 Billion failure may be the begining of their end.

      • donkeycrock
      • 12 years ago

      na, they will just raise the price of future OS’s to pay for their mistakes. Corporations always get the last laugh. ๐Ÿ™

    • Heiwashin
    • 12 years ago

    Nice response, somehow i don’t think the stockholders will feel that way when given the direct offers. Correct me if i’m wrong.

    • Nitrodist
    • 12 years ago

    Ballmer scares me.. ๐Ÿ™

      • NeXus 6
      • 12 years ago

      Same here. The guy is crazy:

      ยง[<http://www.youtube.com/watch?v=wvsboPUjrGc<]ยง

        • MadManOriginal
        • 12 years ago

        Go monkey boy, go!

      • Krogoth
      • 12 years ago

      He is going to have a heart attack or something.

      • PetMiceRnice
      • 12 years ago

      Way back in the day, I used to think he was a nice man (although perhaps a bit odd). How times have changed. It wasn’t very good of him to say these sorts of things.

    • Stijn
    • 12 years ago

    I just don’t understand why /[

      • indeego
      • 12 years ago

      The Googleg{<.<}g

      • BenBasson
      • 12 years ago

      I don’t understand either. Mashing up companies with different cultures and directly competing products makes very little sense to me. Microsoft should take that ludicrous sum of money and use it to buy a clue about developing its own online service range into something that doesn’t suck.

        • Joshvar
        • 12 years ago

        /[

          • BenBasson
          • 12 years ago

          Well sure, but what’s their plan?

          1. Buy average-at-best web service provider.
          2. Combine with existing average-to-rubbish web services.
          3. ?????
          4. Profit?

          Not exactly a winning formula. I fail to see where the huge value is in Yahoo besides the brands that they own, and they’re not really doing a lot to compete with Google under Yahoo management. I’m less than confident that Microsoft can do better.

            • A_Pickle
            • 12 years ago

            One word:

            Users.

            • BenBasson
            • 12 years ago

            Google is proof that users will pick the best service, especially in a market where all the products are free (at point of use, i.e. based on advert revenue). Buying Yahoo will only delay the inevitable unless they start offering products that anyone cares about.

      • willyolio
      • 12 years ago

      this newfangled interweb thingamajiggy seems to be important to them.

      • Krogoth
      • 12 years ago

      #1 -They want to make MSN not suck so darn much.

      #2- To able to place more pressure on Google’s marketshare.

      It is another question whatever it is worth $45 billion. Yahoo is already dying beast. Google has outdone it every way conceivable (expect email). Google already has a large lead in several online services.

        • grantmeaname
        • 12 years ago

        that way they can be twice as mediocre!

    • MadManOriginal
    • 12 years ago

    And in a personal chat with Yahoo board members he also said ‘If you don’t OK the buyout I’ll go monkey boy on your ass too.’

    I really hpoe MS doesn’t buy out Yahoo but there’s not much that can be done to stop the hostile takeover and if I was a shareholder I’d be happoier for the increased value.

      • Krogoth
      • 12 years ago

      …..to sell off when fiscal crapstorm starts to hit the fan.

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