Can Yahoo walk alone? The Market will decide
May 5th, 2008 | by Jose Miguel Cansado |
After Microsoft pulled off the $33 a share bid, the stock market is the judge to approve Yahoo board’s decision, by keeping the share price up, or to disapprove by sending its price below $20.
This morning Yahoo share took a 20% hit, opening at $23.02, after Friday’s close at $28.67. This is still well above the $19 price before Microsoft bid, so the hit has not been so deep as many would have expect, including Mr. Steve Ballmer. How do we interpret this?
1) Many investors think that Microsoft will come back to the table with a new lower bid, but still close to $30. Therefore it is not a bad deal to buy today at $23.
2) The market still values Yahoo as an independent company, with a share price well above the one before Microsoft offer. Yahoo first quarter results did beat analysts expectations, and Jerry Yang has launched many initiatives lately around a new strategy to turn around Yahoo. So the Market could be backing Yahoo’s board.
While I tend to believe that the rational of the Market is more aligned with the first interpretation, I do also believe that Yahoo still has incredible assets. As the successful entrepreneur Martin Varsavsky writes today in his blog, “Yahoo has half a billion unique users per month and outstanding products and services: Yahoo mail has more mail users than Gmail, Yahoo Messenger has more members than Google Talk, My Yahoo is the number one start up page in the world, Flickr is the best photo service [...]“. Martin suggests that rather than Yahoo being sold what it needs is a new management team able to recover the great image Yahoo used to enjoy. He even proposes some names such as Chad Hurley of Youtube and Niklas Zennstrom of Skype. I would propose Martin’s name too.
