Yahoo (YHOO) debacle

By: ispeculatornew
Date posted: 11.07.2008 (4:00 am) | Write a Comment  (2 Comments)

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Yahoo(YHOO) has been in the news for what seems like months, since Microsoft launched an attack to buy it in May this year for 33$.. which the Yahoo management had rejected claiming it was not getting sufficient value for the company.  Fast forward less than 6 months and YHOO investors are not very happy as the stock is down significantly and it seems that unlike Ebay, Yahoo has been losing value as time has gone by.

Firstly, Yahoo has been spending a lot of energy trying to fight this by any possible means. One of these moves was an advertising deal with Google that would have made the acquisition less interesting for Microsoft. However, after months of pressure from regulators and clients, Google has finally backed out of the deal, leaving Yahoo with another effort that has resulted in no positive results. “The companies’ decision to abandon their agreement eliminates the competitive concerns identified during our investigation,” said Thomas Barnett, assistant attorney general in charge of the department’s antitrust division. “The arrangement likely would have denied consumers the benefits of competition.”

As well, the tech world has been seeing numerous talents from Yahoo depart either to work for competitors or for smaller startups, thus decreasing the value of the firm. Investors do not know what is going on at Yahoo but they do see that not much good is happening.

Then recently, one of the prime assets of Yahoo, it’s stake in Yahoo! Japan announced a major problem with fraud in its auction section as apparently 1,5M false members created accounts and sold fake items resulting in fees that now have to be reiumbursed but also a public relations nightmare for the economy and a loss of confidence from its users.

And finally, it becomes very difficult to value a company such as Yahoo! that has a big part of its value in the speculation, this time that Microsoft will come back with another offer to buy Yahoo!. It’s difficult to say if that will happen. Microsoft lost a lot of time and energy on its previous bid and it is clear that Yahoo! has lost a lot of its value since then.

Still, some analysts say that Microsoft could still offer a premium over 75% if it was to place another bid and it would be possible to invest in Yahoo on hopes of a possible bid by Microsoft but right now the Redmond company is tough to predict as it has challenges of its own and it’s not clear that its search position is as high of a priority as it was a few months ago (especially since recent reports have shown a 19% annual increase in ads on MSN, without even needing an acquisition.

But in my eyes, this remains a big gamble and not one I’d get into.

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2 Comments

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