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It?s boo hoo hoo for Yahoo


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Can’t cry over spilled milk

Yahoo! Inc.’s shares dipped to $13 per share last week in the recent U.S. stock market crash. The stock has lost more than 40 percent since July 18th, when the stock last peaked at $22.45. While the stock market has been taking a battering (and it is no longer being called a “market correction” by investment pundits), it is cruelly ironic that investors in Yahoo! could have been sitting in the catbird seat had the Microsoft-Yahoo merger successfully been consummated this past spring when Microsoft was still courting Yahoo!

Yahoo’s stock dropped to a five-year low last week; and with investor confidence sagging in the stock market in general, things aren’t looking very rosy for the company (or for most technology stocks, for that matter). Market analyst, American Technology Research, lowered its 'buy' target for Yahoo to $22 from $33, stating that there is still hope for Microsoft to come back with an offer to buy Yahoo! after its failed bid earlier this year. "As Yahoo shares decline and Microsoft struggles in its online services business, it is increasingly likely Microsoft will make a new offer," said Rob Sanderson, analyst at American Technology Research.

It is obvious that the price will not be as favorable as the one offered by Microsoft about six months ago. In order to re-introduce the Yahoo sale to Microsoft, a small Yahoo investor has said he will proffer a new deal to sell the company to Microsoft for $22 per share. The investor, Mithras Capital, an investment fund that owns slightly less than 2 million shares of Yahoo, or 0.14 percent, says he plans to propose as part of the deal that Microsoft would unload Yahoo's Asian assets and non-search businesses, extract $3 billion worth of cost savings and receive $2.8 billion of tax benefits. This translates into Microsoft paying $10.3 billion for Yahoo's search business; nearly $2 billion less than it offered Yahoo in July.

One of the partners of Mithras Capital, Mark Nelson, indicated that he plans to send a letter to Microsoft proposing the deal to both Microsoft and Yahoo this Thursday. Both Microsoft and Yahoo declined to comment.

Last modified on 13 October 2008
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