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Amey Stone reported early this morning that according to Justin Post, a Merrill Lynch analyst, Microsoft might consider a major acquisition such as Yahoo or eBay. The focus immediately shifted to Yahoo: "An acquisition could instantly vault Microsoft to the leading revenue position on the Internet," Post wrote, estimating that merging Yahoo! with MSN would create $450 million in savings.
Not only that, but the combined Yahoo and Microsoft's MSN sites would give Microsoft a 41 percent share of U.S. Web searches, (Google's share is 44 percent). And traffic wise, "a Yahoo acquisition would also position the MSN portal as the top Web property, above Time Warner's AOL," he wrote.
Could Microsoft buy Yahoo!?
Well, cash they have, $34 billion of it. This cash balance was intended for share buyback and higher dividend payout, but might be better used for an acquisition. With Yahoo having a market valuation of $43.9 billion, Microsoft could buy it with some of the cash and the rest in debt, according to Post's analysis.
But what if Yahoo isn't for sale? And what about antitrust issues this might raise? Or conflicts with Microsoft's current partners? Questions needing answers before Microsoft jumps into this.
Would Microsoft buy Yahoo?
I wish I could say - that's for me to know and for you to find out - but I'm just in the dark as you are.
The idea sounds like a good deal for Microsoft, what with it gaining market share and traffic, but is it good for Yahoo? The market seems to think so as the stock jumped 2.25% today, on a day when the overall market was down.
Would Post have mentioned this if there wasn't anything in the works?
Merrill, according to reports have done non-investment banking deals with Microsoft but expects to do some the next year. The famous Chinese Wall that is supposed to keep investment banking information from the brokerage branch is sometimes non-existent, meaning, while everybody knows what's going on, appearances must be kept. It is for this reason alone that I think Post is really speculating and has no real information to base his theory on other than obvious market data. And given that data, that's a darn good assumption I'd say.
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Reader Comments (Page 1 of 1)
6-24-2006 @ 9:11PM
Rick Alazraki said...
Melly Alazraki,
Imagine my surprise when looking at my computer and seeing your name, well our name. You dont see too many people with the last name Alazraki now do you?
Rick Alazraki
6-25-2006 @ 9:36AM
Melly said...
Rick, what a surprise!
With so few Alazraki it is possible we might be somehow related :)
6-25-2006 @ 4:56PM
Donald Zuchelli said...
The Microsoft Blog just appeared it seems on my financial pages on AOL and I have been trying to eliminate the Blog section. How do I find these instructions to accomplish this task?
Connander331@aol.com
6-26-2006 @ 2:32AM
Money Guy said...
I dont really think that it makes sense for microsoft to buy Yahoo!. In my opinion there are several reasons behind it.
1. What happens to MSN after microsoft buys Yahoo!. Just as one can not travel in two boats at the same times, so a comapny can not continue to have two divisions doing the same thing and competing against each other. One of them will have to die. Killing MSN will be a huge loss to microsoft not only in terms of investments made so far but also in terms of subscribers. It is not necessary all the users of MSN will move to yahoo+msn. If microsoft could not provide a good integration then many users will move to other companies.
2. Spending all your cash to buy a company doesnt make sense in this highly dynamic tech industry. When microsoft has fears of being obsolete then there is no such gurantee that a new tech invention couldnt make yahoo or google obsolete.
Although it is true that microsoft hasnt yet been able to get its act togather to emerge as a company who "understand" web. Their web interfaces are cluttered, user unfriendly and buggy. I think microsoft should spin off MSN so that it could develop on its own, away from the shadow of windows and office.