Microsoft’s big loss

Posted on February 10, 2008
Filed Under business |

Earlier this week, Microsoft made a huge offer to buy Yahoo. They offered $40 billion dollars for the Internet behemoth hoping to make themselves into a player in the new Internet economy. Microsoft has struggled during the last few years to catch up with rival Google (rival only in Internet business because Microsoft does a lot more than just Internet.) This was the second time that Microsoft made an offer to buy Yahoo.

The problem with the most recent bid is that many of Microsoft’s stockholders didn’t think that it was a good idea and started dumping their stock. The end result was that Microsoft’s stock price dropped to the point that the company lost nearly $40 billion in value (shares are selling about $4 lower at Friday’s market closing than they did before the acquisition offer.) So, the actual cost of the acquisition is double the actual offer. Even worse, it would appear that Yahoo has declined to sell putting Microsoft into an even worst position, i.e., they lost all this value for nothing. Moreover, it is possible that Yahoo is declining the offer because they want more money. But Microsoft’s offer was already such that it seriously overvalued Yahoo. And if they increase their offer then they risk losing even more in value as more stockholders might continue to get rid of Microsoft stock.

The winner out of all these seems to be Google. First Google announced that they were unhappy about the possibility of a Microsoft and Yahoo mergers; they claimed something about creating a monopoly in the Internet marketplace but that is weird because even if the two companies joined, Google would still be having a much larger share of the market than both. If there is a monopoly online today that is Google and not Microsoft or Yahoo or both of them together. At any rate, the fact that Yahoo declined to sell and that Microsoft lost a tone of money regardless can be considered a victory for Google.

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