Microsoft’s plan boardroom coup at Yahoo

[Lovely]

I read the below update on Microsoft and Yahoo in one of our local daily and I think the news is worth sharing for does who is monitoring the merger and have not hear about the Microsoft plan to oust Yahoo board:

Microsoft’s Chief Executive Officer, Steve Ballmer, facing a slowdown in Windows software sales and losses in his Web business, may start a fight to oust Yahoo Inc’s board and pave the way for a takeover, Bloomberg News reported on Saturday.

Ballmer, who set a deadline of Saturday for Yahoo to give in to Microsoft’s $44.6bn bid, is trying to crack Google’s dominance of the Internet advertising market. That means handling more Web searches, selling advertisements with more graphics and videos, and being able to target campaigns and track their success.

Microsoft, the world’s biggest software maker, can not afford to let Yahoo go, said Sachin Shah, an analyst for ICAP Securities in Jersey City, New Jersey. The company has spent billions creating a Web search engine and technology to sell ads, and buying Internet companies such as AQuantive Inc Acquiring Yahoo would give it the No. 2 spot in the $41bn online ad market.

“Microsoft does need Yahoo,” said Shah, a merger-arbitrage analyst, in an interview with Bloomberg Television last week. “If they didn’t, they would have walked away a long time ago.’’

Losses at Microsoft’s Internet business widened to $228m last quarter and sales rose to $843m, at the low end of company forecasts. Google, owner of the most used Internet search engine, had $3.7bn in revenue in the period, excluding sales passed on to partner sites.

Advertising linked to search results accounts for more than half of Internet ad sales. Google handled six times more queries in the US in March than Microsoft, according to ComScore, a Reston, Virginia-based researcher.

“Microsoft is committed to completing the transaction and is unlikely to walk away from the deal,” Citigroup analysts Brent Thill and Mark Mahaney in San Francisco wrote in a note to clients on Friday.

Microsoft fell 6.2 per cent to $29.83 in Nasdaq Stock Market trading yesterday, a day after reporting sales of its Windows personal-computer software that fell short of analysts’ estimates. The value of the bid, originally $31 in cash and stock, has dropped to $29.68.

Some Microsoft investors say Yahoo boss, Jerry Yang would lose a proxy fight unless he finds an alternative that will boost his company’s shares.

Much of the stock is held by arbitragers who would accept $31, Walter Price, a portfolio manager at RCM Capital Management in San Francisco, said this week. The firm owns Microsoft and Yahoo shares, Bloomberg said.

Yahoo declined 1.8 per cent to $26.80 on Friday.

Ballmer called the offer “quite generous” on Friday. ``By this point if they don’t agree we would have to take our arguments directly to the shareholders,’’ he said after a speech to business executives in Madrid. ``We will see what they do, and we will move appropriately at that point.’’

Options include a proxy fight or walking away from the offer and building Microsoft’s Web unit without Sunnyvale, California- based Yahoo with other investments and partnerships, Chief Financial Officer Chris Liddell said this week.

Yahoo spokeswoman Diana Wong didn’t return calls for comment on Friday. Yang has said repeatedly that Yahoo is worth more, citing investments in Asia, the company’s No. 2 position in Internet searches and potential cost savings of the deal. Seeking an alternative, Yahoo has approached rivals such as Time Warner Inc.’s AOL about a combination.

Though Microsoft officials said this week that they won’t raise the offer, analysts said it’s still possible.

“Ultimately, we view this as posturing,’’ Heather Bellini, an analyst at UBS AG in New York, wrote in a note on Friday.

“Even if Microsoft tried to lower the value of the deal or walk away, we would expect them to eventually come back and raise it in order to consummate the transaction in a friendly manner,’’ said Bellini, Institutional Investor magazine’s top-ranked software analyst.