Yahoo chief executive officer Jerry Yang said he is still weighing Microsoft's $44.6 billion takeover bid, but the world's second most popular internet search engine has a "wide range" of alternatives to taking Microsoft's $31 a share offer for the company he co-founded in 1994.
In an e-mail to his 14,000 employees he urged them to stay focused as Yahoo pursues its "transformation strategy".
Yang (39) may seek an alliance in search technology with bigger rival Google, lure a social-networking site such as News Corp's MySpace into a partnership or look for another buyer, such as Rupert Murdoch's News Corp, analysts said.
Those options probably won't pan out, said Andrew Frank, a New York-based analyst at research firm Gartner Inc. "They're going to have difficulty finding another suitor to pay that kind of premium," Frank said in an interview. "Odds are in favour of them acquiescing." Microsoft's February 1st offer is 62 per cent more than Yahoo's closing share price the day before.
Finding a better bid or an alliance partner might help him regain investor confidence in his turnaround plan or attract a higher offer from Microsoft, Stanford Group Clayton Moran in Boca Raton, Florida, said this week. Yahoo rejected advances from Microsoft last year. Given Microsoft's commitment to expand in the online advertising market, a higher bid from the company is the most likely scenario, Citigroup analyst Mark Mahaney wrote in a note to clients yesterday. "It's reasonable to assume that Microsoft might be willing to increase its offer," Mahaney said.
Yahoo's other options include a partnership with Google, he said. The San Francisco-based analyst advises investors to hold the stock. Yahoo may also solicit rival offers from News Corp and Comcast, Stanford's Moran said this week.
Other analysts say the company may try to form a partnership with a social-networking site like MySpace. News Corp isn't interested in bidding for Yahoo, Murdoch said on a February 4th conference call. Still, no other potential suitor has anything that can approach the $21.1 billion in cash and short-term investments that Microsoft had as of December 31st, more than double the combined cash of Time Warner, News Corp and Comcast. Even Microsoft said it would probably have to borrow money for the first time to finance the Yahoo deal.
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