Microsoft appears to have leaked the idea of a higher offer for Yahoo via The Wall Street Journal, but there are heavy hints that the company is prepared to walk on the deal. The WSJ story says:
Microsoft this week indicated a willingness to raise its bid to as much as $33 per Yahoo share, attempting to avoid the hostile takeover battle Mr Ballmer had threatened, according to people with knowledge of the situation. Mr Ballmer and Microsoft advisers lobbied Yahoo shareholders to bring pressure on its board to do a deal. Yet Mr Ballmer in recent days has also appeared ready to walk away from Microsoft's offer altogether, say people familiar with the matter, as Yahoo and some of its shareholders seek significantly more money.
The story adds:
The success of a Yahoo test to carry search advertising from Google Inc has played a key role in emboldening some at Yahoo in their continued resistance to Microsoft's overtures. Pending developments this week in the Microsoft standoff, a broader pact along those lines could possibly be reached within the next week, say people familiar with the matter.
Of perhaps even greater significance is what it signals: that Yahoo's bosses would rather commit commercial suicide than get taken over by Microsoft. (In the short term, Yahoo can make a buck quicker by giving Google control of its finances, but in the long term, it has to do exactly what Google wants.)
Microsoft's offer is currently worth about $29 a share, but shareholders are said to want $35 to $37, and Yahoo's board even more. Yahoo is actually worth around $19, and in my view, heading downwards. It's not unusual for a semi-hostile takeover to mean that a company fetches more than it's worth on the open market, but whether this particular deal would do much for either company is open to doubt.
My advice to Ballmer is: walk away now! Withdraw the offer and do something useful for six months. If you still want Yahoo then, it will be available for less than it is today.
