October 10th, 2008
Wall Street: MSFT should buy Yahoo, consider RIM
A Wall Street investor has suggested that the stars may be aligned just right for Microsoft to make another run at Yahoo, this time for $22 per share. Investment fund Mithras Capital, which owns more than 1.9 million shares, or 0.14 percent, of Yahoo, said Microsoft has a window of opportunity to act 1) while the ad deal between Yahoo and Google is on hold for further regulatory reviews, 2) while Yahoo’s stock is reaching new five-year-lows daily, plunging to $12.65 this week, a far cry from Microsoft’s original $31 per share offer, and 3) before Yahoo cuts a deal with Time Warner to acquire AOL.
“It is imperative for the Yahoo board to embrace this proposal as the best outcome for long-suffering Yahoo shareholders,” Mithras Capital partner Mark Nelson said in a news release.
As for Microsoft-Yahoo, Mithras Capital has suggested a proposal that would allow Microsoft to buy Yahoo’s search business for $2 billion less than it would have under the original offer that was rejected this past summer. 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, meaning the software giant would pay $10.3 billion for Yahoo’s search business, according to the Reuters article.
In a note to clients, American Technology Research analyst Rob Sanderson wrote, “As Yahoo shares decline and Microsoft struggles in its online services business, it is increasingly likely Microsoft will make a new offer,”
Separately, as shares of Research in Motion also plunge, analysts have suggested that the Blackberry maker could be vulnerable to a takeover from a well-capitalized buyer - such as Microsoft Corp.
Previous coverage: Was RIM’s Wall Street beating unjustified?
At the beginning of the summer, RIM’s shares has been trading near $145 but have since fallen to less than $60. Meanwhile, Microsoft - with its Windows Mobile operating system - is feeling competition heat up in the mobile space as Google launches the Android mobile operating system, Apple’s approahes the sale of its 10 million iPhone and RIM tries to push the Blackberry brand in front of the consumer market.
“RIM is a massive strategic fit” for Microsoft, Canaccord Adams analyst Peter Misek told Reuters. And, given the credit markets today, Microsoft is positioned with enough cash on-hand to cut a cash-and-stock deal to avoid the credit markets. Co-CEOs Mike Lazaridis and Jim Balsillie, who have taken RIM from its infancy to a leadership position in the smartphone market, could resist such a takeover. But Mark McQueen, chief executive of Wellington Financial LP in Toronto, told Reuters that, with a significant premium, investors might find a Microsoft offer hard to resist.
“The people I’ve talked to who deal with institutional investors every day say they would look at this as a gift,” McQueen told Reuters. “In this particular climate, you have to part with your loved ones sometimes.”
Sam Diaz is a senior editor at ZDNet. See his full profile and disclosure of his industry affiliations.
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