Tech acquisitions are difficult to do. Microsoft was hoping it could compel Yahoo to sell when it's stock fell to an incredible low of $18.58 a share. Offering $31 a share, Microsoft hoped that Yahoo management would agree to an acquisition. They threatened to go hostile by taking it to a shareholder vote, but as announced on Friday, they will not prevail.
After hearing about the acquisition, I immediately put in a sell order at $30. I figured the stock would not go to $31 unless Yahoo took the offer. If not, maybe Microsoft would raise, but there really not other bidders in a recessionary environment. Then we got lucky.... On one of the days, it a rumor came out that News Corp may counter. My sell order went through for the high of the day. Since then, the stock has remained in the $26-29 range.
Clearly, Yahoo's management and key shareholders did not want to sell. They felt the firm was undervalued. They have significant assets around the world and are #1 for traffic with a use base of Mail users. Yahoo's time on site numbers are amazingly high. Once a highflier, Yahoo is valued low because of Google's success in search. This is true, however, Yahoo's management was discounting the value of its other assets.
Technology acquisitions are notoriously difficult to pull off. Differing cultures cause all sorts of problems. The best people look to leave before the inevitable period of consolidation and rationalization. While integration is occurring, people take their eye off the ball, giving the competition an advantage. Meanwhile pursuing a hostile takeover is distracting to the acquirer. Microsoft's management realized this. They may have some properties, but nothing close to Yahoo's. Imagine the Pyrrhic victory of winning a hostile takeover while your new assets declines in value.
So now Yahoo's stock is in line for a difficult fall. No one wants to buy it and it's going to be a long time before all of Jerry Yang's strategy takes roots. They may tie up with Google for advertising, so that may raise revenue in the short term, but they need a way to fire people's imagination. Right now, social networks are hot. However, the internet and media market goes through all sorts of waves. Can Yahoo lead the next one?
So I'll buy again after the fall...