" ITREALMS: Microsoft may opt for partial share in Yahoo!


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Wednesday, July 30, 2008

Microsoft may opt for partial share in Yahoo!

The last may not have been heard about the Microsoft’s burning desire to own a controlling share of the reputed online search engine, Yahoo! as its official confirmed weekend that it may re-open negotiations with the new board expected to emerge after the August 1, 2008 shareholders’ meeting.

The latest move, ITRealms Online gathered would now target making in roads in the negotiations with interest for partial instead of wholesome purchase of the search engine, Yahoo! by Microsoft.

With countdown remaining just 48 hours to come by for the next shareholders meeting of Yahoo! there is unexpected high handedness as even accredited media for the meeting have been banned from recording in any format.

Anticipation is also high at Microsoft that its inspired billionaire cum activist and top shareholder in Yahoo! Mr. Carl Icahn would uphold his threat to sack the current board of directors with Mr. Jerry Yang as the chief executive.

ITRealms Online recalls that Yang-led management team at Yahoo! refused in the past six months to yield to Mr. Icahn’s Microsoft motivated deal of disposing Yahoo! for United States Dollars 47.5 billion (about N5.59 trillion).

But new development emerged at the weekend that Microsoft after all would not be gunning for a wholesome purchase of Yahoo! as it foresees the entity declining assets.

The Chief Financial Officer (CFO), Microsoft Corporation, Mr. Chris Liddell gave this indication at the Financial Analyst Meeting 2008 held at the company’s headquarters, last weekend.

Commenting on Yahoo! deal lately, he said that certain elements have changed in the company since its initial offer was botched few days back.

As said by him, Microsoft went into the acquisition totally genuine, which they believe was a good deal and consequently made an offer based on that belief that it is incredibly good value to the shareholders of Yahoo!

Now, he said, Microsoft has taken a second look at the proposed offer and come to the realization that it was an incredibly generous bid, but Yahoo! has continued to decline in asset.

“We took the view, and we still take the view, that Yahoo! is essentially a declining asset,” he declared.

He explained that what is now available is a situation where you have an expectation from a vendor that looks like this, an expectation from a buyer that looks the other way and so “you see a declining parallel path.”

“It’s ironic now that we have a situation where the vendor is happy to sell to us at a price something like what we originally offered, so if you like that path was intersected where we started -- and having rejected that and said it was substantially undervalued six odd months ago,” the CFO said.

He stressed that what changed was time, because “Time passed and value eroded” and its no longer economical for Microsoft.

“We don’t have a situation now where the initial offer that we made makes any sense any more from economics,” Liddell said.

“There’s no way that you can get the sort of boost that you get from Yahoo! by doing things organically …. There has to be some economic justification for acceleration at the end of the day time. And if time passes and the value of what we are buying erodes for one reason or another, it stops making sense for us to do it,” he said.

Although he did not disclose the latest offer to be made when the negotiations reopens in the coming days, Liddell noted that in view of going forward, that the chances of buying Yahoo! on full scale is now very minute.

“I think the chances of us buying Yahoo! on a full acquisition basis are so small that they are essentially negligible,” he said, adding that a full acquisition certainly in the timeframe and sort of economics that were previously thought “makes no sense.”

Meanwhile Microsoft has announced the restructuring of the Platforms & Services Division (PSD) by splitting it into two groups.

Chief executive officer, Microsoft Corporation, Mr. Steve Ballmer made this announced penultimate Wednesday after the Yahoo! deal failed.

Noteworthy is that PSD president, Kevin Johnson would be leaving the company probably by end of this month.

The new two groups that emerged from the split are Windows/Windows Live and Online Services, with both groups reporting directly to the CEO, Mr. Ballmer.

While Microsoft officials were optimistic of the Yahoo! meeting outcome, industry observers were of the view that some clusters may still be working against Microsoft due to the fear that it would want to emasculate the online business like the firm did with the Personal Computing (PC) evolution initially, which saw almost all PCs coming into market with Microsoft Operating System (OS) and now on battlefield with Open Source advocates.

Yahoo! prides itself as the world’s largest global online network of integrated services and is one of the most trafficked Internet destinations worldwide that was founded 13 years ago.

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