Microsoft to Raise Yahoo Bid to $34--Citi
True, Yahoo had to explore other options. True, the possibility that Yahoo might blow Q1 could have led to a takeout below the original $31. But now all that's done.
Citi analyst Mark Mahaney upgraded Yahoo (YHOO) this morning, arguing that Microsoft won't walk away and will raise its bid to $34. We agree with the not walking away part, and we also agree with the raising the bid (at the 11th hour, when the companies are seriously negotiating). Thanks to Yahoo's apparent delivery of a solid Q1, we also still think a mid-$30s agreement is conceivable (though we wonder whether this would again be tied to Microsoft's stock price and therefore be variable). We just wish the companies would get on with it.
Mark Mahaney:
We Continue To View A MSFT-YHOO Deal As The Most Likely Outcome. We believe that a YHOO sale to MSFT - at a price likely higher than the initial $31 bid - is the most likely outcome. While regulatory risk may be material, we continue to believe that limited combined market share allows the deal to go through. And we would view YHOO strategic moves as a forcing function to a higher MSFT bid.
Why It Is Unlikely MSFT Will Walk Away - 1) Despite 3-4 years of making online advertising a key strategic priority, MSFT has yet to demonstrate traction - its share of U.S. Online Advertising was flat to slightly down in '07 (7.5% vs. 7.6% in '06); 2) Google's share of U.S. Online Advertising has significantly increased (35% in '06 to 40% in 07) & the DoubleClick acquisition could materially ramp its display ad biz; and 3) No other step could potentially address the scale/liquidity challenge of MSFT's ad platform.
Could There Be A YHOO Strategic Move Forcing Function? - While we continue to see no other competing bidders, we believe YHOO is aggressively pursuing strategic alternatives. One possibility is a tie-up with Time Warner, whereby TWX would contribute its Online Content assets to YHOO in exchange for a stake. We believe this could serve as a forcing function to a higher MSFT bid.
[We disagree--an AOL deal is just not a credible alternative, and we think Microsoft knows that.]
Our New $34 PT Reflects Our Scenario For An Increased MSFT Bid - We think the strategic value of YHOO to MSFT is very significant. $34 would also reflect a 16X EV/EBITDA multiple on our $2.2B 2009 EBITDA estimate (adjusted for YHOO's material $10.4B in off-balance sheet assets), which is below the company's recently stated $2.7B 2009 EBITDA goal and does not reflect any deal synergies. We view several deal multiples (aQuantive, Twenty-Four Seven Media, and Digitas) as all supporting a mid-to-high teens EBITDA multiple.
If you've got it, you should have already played it. Don't play it now as a tease. You'll end up picking your new teeth out at the dentist from a catalog.
Don't listen to these rank amateurs. You've got to get inside Ballmer's head.
Stay tuned... I'll be back and show you the way.
In the meantime, you'll need to ring up the Keno brothers and see if they can broker some French antique end tables in the Redmond general area and have them put on retainer. Cost is no object.
Also, pick up a case of cold beer. I don't know... I figure Ballmer might just be a Coors kinda guy, but you should use your best intelligence on that... Also, if you can locate some peyote it'll be a nice plus.
And, have somebody make up a felt bullseye that you can scotch tape to the wall.
Now, be patient... I'll be back later tonight and we'll plot some strategy and plan some tactical maneuvers, the likes of which usually lead to my local auto salesmen just handing me the blank contracts and asking me to fill 'em out myself.
Now, before I go take care of some family business, I want you to promise me something, Jerry. When you get in touch with Ballmer, the first thing you have to do is to lock eyes with him... Don't drop the lock for any reason... Don't... promise him that when you begin the negotiations that a deal will come out of it if he'll just negotiate in good faith. He's a real sweetheart and you can take him if you'll just apply what I'm about to tell you.
I'll be back later tonight and lay out the tactics for you.
BTW, almost forgot, get hold of a copy of Santana's "Black Magic Woman." I often use it for difficult cases.
TaTa, joeblow
Yang didn't want to merge, now he sees it as almost inevitable. Yahoo board wanted more, now they know anything past initial offer is gravy. Part of the show was probably the board protecting itself against lawsuits from the unlucky minions who bought their Yahoo at $35+, some at over $100.
Barring a Q1 miracle that would recalibrate Yahoo prices without help of MS bids, I think the fat lady is now almost done singing on this deal.
Tell the bankers and the staff to all get out and just leave you and Steve alone. You’ve got to go to Steve’s office though since you want him to feel very comfortable. Make sure you’ve had the stuff shipped over to his office. When you get there he may be fondling the end tables and he might just toss one, so, if he does, let him toss it. Just make sure and keep one of them back for later tosses, as I’ll explain.
Don’t forget to make a hard and fast eye-lock with him… tell him this is it, and that a deal will come from it if he’ll just be agreeable to negotiate in good faith. I know he’s ready, so you should be too.
Both of you can knock back a few beers, just to get things rolling. Don’t mention price yet… just talk about old times (if you had any, and if you didn’t, make like you did) and drop some hints that you’ll enjoy soon being in the family. It ought to make Steve smile and the beers ought to move pretty fast.
Later, you’ll both have the opportunity for a little sport. First, you can draw a line about 6 feet from his desk… move the furniture, especially the end tables and then draw the line. Give him a friendly challenge to a pissing contest. This is not for points but just for fun. Only, you have to let him win. Don’t try to outpiss him, and forget that business about AOL/TW, or you'll just piss him off!
At the end of that, and he’s won, use a little of the peyote and put Black Magic Woman on just as loud as you can stand it. The staff’ll come to the door, but just tell him to cool their heels, that you both are okay and things are well under way.
Now, put the felt bullseye on his wall. Make sure it’s at least 20 feet from in front of his desk. Tell him you’ll start with 42. He’ll squeal, but just let him for a while to get it out of his system… even let him toss either of the end tables he’d already tossed, but not the one you’re saving back. He should really appreciate that you’ve brought him some expensive tosses. Make sure there’s some evidence that the Keno brothers have been over ‘em and selected them specially for Steve.
When he’s run out of energy, tell him again that it’s 42, but that you’ll knock off 75 cents for every time he can hit the bullseye with the other end table, and give him 10 tosses. Now, don’t worry. I know he’s an accomplished furniture tosser and he’s good. He’s a big boy and I figure he’d hit about 7 bullseyes or more under normal circumstances, but that peyote can seriously alter both perception and motor skills, so, I’m figuring he might clock off 3 or 4, tops.
Now, he very well may balk on the 42, but you need to hang in there and not let the starting point drift too far down, because then he might hit more bullseyes and take a serious whack out of the final price. Under NO circumstances should you allow the tossing to start under 40. You may need more peyote, but for God’s sake, don’t let the tossing start under 40.
So, let's figure the worst case. If we start at 40 and he manages to hit 5 bullseyes (doubtful, but he’s a talented tosser!), you’ll end up at about 36.25 or so. Even one additional bullseye would do it at 35.50 which was probably more than you were going to get anyway, without a lot of grief first.
Suppose you get lucky and the peyote is very effective. Well, who knows?… He might only hit 2 or 3 at the most, and you’re in the money for something like maybe 37.75, a real bonus, no doubt!
All the while now, before the peyote wears off, keep the Black Magic Woman up loud and strong and stroke his ego, Jerry, stroke him and paint the ‘Vision Quest’ picture for him… let him see the future… Before long he’ll be daydreamin’ about the shaking hands ceremony and the combined pro-forma EBITDA dog and pony show that will marvel and mystify both critics and fans alike.
If all this fails, still do not let him out of the room and remind him he promised to negotiate in good faith. After the beer runs out then you have to fast, both of you, with only water. Show him the shiny glossy 8K again and again, and keep fasting and playing the Black Magic Woman.
It may take a while, but by the 3rd day or so, maybe just after the 2nd day if you haven’t used up all the peyote already, you’ll both all of a sudden get a mutual image of a price. It’ll be hanging in the air… a distilled crystalline vision that you’ll both see emerge from the sea of music, fasting and the emotional white-out that will leave you both exhausted but with a number in hand you can both live with.
Congratulate yourselves and then let the staff in so they and the bankers can start cooking the merger dog and pony show.
http://search.yahoo.com/web
And then type e-x-a-c-t-l-y, completely (no fudging, you’ll see why) and letter-for-letter, s-l-o-w-l-y to enter all these phrases:
“How to compete with Google”
“To be or not to be that is the question whether”
“Driving me”
“Driving thr”
“Simultaneously”
“Looking for songs”
“Looking at ways”
“Spontaneity”
--
Now, to you yahoos, if you’re listening in your headquarters-soon-to-be-winery offices:
You should build an ad campaign with just ordinary people searching for ordinary things. Show their faces, reactions, some trendy music (think iPod ads), and show the results of their searches, what happened or was bought or done, or experienced… and make this searching thing a game… a fun thing!
It can be funny, ironic, stimulating, evocative, sincere… but for God’s sake, don’t make it technical. Show it being done and tell about the results, but don’t teach… DON’T TEACH!
Go forth now with what ye have learned from old joeblow.