Microsoft and Yahoo: Investors react
Posted
Feb 01 2008, 05:25 PM
by
Matt Koppenheffer
Rating:
If there was anything that could drown out the noise that the U.S. Federal Reserve has created lately, it's Microsoft's attempt at a hostile takeover of Yahoo for $44.6 billion.
There's little doubt that there are many Yahoo shareholders that are quite happy today. Over the past year its stock has languished, sinking from a high of over $34 to a close of just over $19 yesterday. Microsoft shares declined on the news, meaning that the half-cash half-stock buyout price that was originally $31 is now a bit lower, but Yahoo's shares still closed up nearly 50%.
For some real time reactions to what the takeover proposal means, I headed over to CAPS to check out the chatter.
Most of the CAPS players piling in on the Yahoo board are looking for some quick gains from arbitraging the current trading price and the buyout price. CAPS All-Star Gtrinvestor, for example, noted early in the day that the "[Microsoft] deal is valued higher than the shares are currently trading." Others, like angrytourist, wished they had taken the plunge on Yahoo shares sooner: "The phrase 'kicking myself' seems apt, as I've been eyeballing Yahoo for several weeks. Apparently so has Bill Gates!"
Perhaps more interesting are the reactions on the Microsoft board. Microsoft's stock closed down nearly 7% on news of the buyout, but many on CAPS were positive on the deal. CAPS All-Star iamamartin isn't so sure that Microsoft will be able to turn Yahoo around, but likes Microsoft shares down 7% nonetheless:
[Microsoft] profits from a (still) monopoly for desktop OS and MS Office. XBox is now making money. If they get Yahoo, look for cost cutting and a good faith effort to right the Yahoo ship, which has been floundering for some time now. I don't know if [Microsoft] can do it, but the market beating down the price on the [Microsoft] cash machine means this is my "IN". [Microsoft] sits on HUGE pile of cash, so room to raise the dividend - VERY important for this Fool.
Reactions carried over to Yahoo's arch rival Google as well. On the back of disappointing numbers and the deal announcement, Google's stock continued its freefall. Many on CAPS think that it's gone a bit too far and vv234 noted:
I do not believe the "messy marriage" between [Microsoft] and [Yahoo] will pose any significant thread to the leadership of [Google] in the next couple of years, eventually, maybe and depends on how they execute. The recession (if any) will go away soon.
Have some thoughts of your own to share on the fallout from the potential takeover? Head over to CAPS and let the community of over 80,000 investors know what you think.
(Full disclosure: I do not have a financial position in any of the companies mentioned.)
