Yahoo!’s (NASDAQ: YHOO) response to Microsoft’s (NASDAQ: MSFT) can best be described as self-serving. In a letter to Redmond, made public this morning, Yahoo!’ board reasons "Our position is simply that any transaction must be at a value that fully reflects the value of Yahoo!, including any strategic benefits to Microsoft, and on terms that provide certainty to our stockholders."
The letter references Yahoo!’s three year projections for its business. The numbers in this are aggressive and no man, woman, or child who has seen them believes that they can hold up, especially in a slowing economy. The Yahoo! board also says that the company is in conversation with other parties, but there is no evidence that any of these talks are far along. None of the firms are named, which disclosure rules would probably require if the conversations were in final stages. The board cannot come up with a rationale explaining how any of these deals is worth more than the Microsoft offer.
The Yahoo! board also claims that "we recently reaffirmed our Q1 and full year guidance, which is a testament to our ability to perform in line with our expectations despite the current economic environment." But, the range of guidance given by the company at the end of the last quarter is very broad, and Yahoo! is not saying that it will come in at the high end of those forecasts.
The Yahoo! board has done the company no favors. It has tempted Microsoft to lower its offer or simply walk away. A protracted proxy fight will pull both management and the board away from fixing the company.
Yahoo! has been broken for over three years now. It cost the company’s former CEO, Terry Semel, his job. Replacement Jerry Yang has not done a single thing to show that he is any better as a chief.
Yahoo! has not a single legitimate card to play in turning Microsoft down.
Douglas A. McIntyre
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