Curiosity piqued, I wanted to go and compare what happened in the Oracle BEA case versus Microsoft and Yahoo.
Oracle offered 25% premium over market price at $17 per share, it was considered low by BEA.
After some public fighting.
The final buyout price was 19.375. Which made the total over premium about 40%.
On the other hand, Microsoft offered $31 per share at a 62% premium. At the $33 they were willing to pay, it would be about 73% premium, at the 37 asked it would be 94% premium. In other words, if they ended up aroudn 34-35, it would be a similar increase in premium price (~15%).
So, in the end, is the problem just that Microsoft’s initial bid was too high?
In alternate reality land,
Microsoft offers at a $29 price for 52% premium. Eventually leading to a $33 deal.
50% is a high premium (see EA’s bid on Take Two), and I don’t think anyone would have blinked an eye at such a number.
Here’s my take:
Balmer wanted to close the deal fast. He figured, instead of going through a protracted and lengthy buyout discussion, he’d just circumvent it by offering essentially what the final price would be. Surprising to Balmer, not surprising to everyone else, Yahoo didn’t want to take the first offer.
From here, you can see why everything played out the way it did. Balmer thinks his offer makes perfect sense and refuses to outbid himself. Yahoo thinks if Microsoft is willing to pay this much, clearly they must be worth even more than that.
So where does that leave things? The big winner is GOOG. YHOO and MSFT are doing enough by themselves to sabotage their chances of winning without GOOG needing to jump in.
YHOO may do well, supposedly Panama is on its way up. The display product (AMP!) isn’t half bad (though not half good either), and hopefully will become a base for all display across the internet (though at the rate they are bleeding talent, I wouldn’t hold out hope here).
MSFT is exactly where it always has been. If they take my advice, they’d just start hiring all that talent that Yahoo is bleeding. Live, Hotmail, MSN aren’t bad brands. They aren’t winning, but they aren’t unknown to the average user. Internet Explorer is still the dominant web browser. If they were buying YHOO for the talent, and the talent is leaving in droves, they could just buy up the talent. Start with one or two good guys and let the good ole networking effect take over from there.
