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February 16th, 2008

Uh oh. Yahoo's Alibaba is antsy about Microsoft; Good luck getting to $40 a share

Posted by Larry Dignan @ 3:40 am

Categories: General, Microsoft, Search, Web Technology, Yahoo

Tags: Yahoo! Inc., Microsoft Corp., Alibaba, Government, Financial Accounting, Internet, Mergers & Acquisitions, Real Estate, Finance, Investment

Alibaba, Yahoo’s stronghold in China, is reportedly wary of the Microsoft’s $44.6 billion bid for the Internet portal. Alibaba is so wary of Microsoft that it is looking for more management independence from Yahoo.

According to the Wall Street Journal, Alibaba management is worried that a Microsoft purchase of Yahoo would hurt its links to the Chinese government. Alibaba, a B2B trading site, is a national champion in China and Chinese regulators are already sniffing around about how a Microsoft purchase would affect the company.

This is bad news for Yahoo. Really bad. Why? If Yahoo wants Microsoft to raise its bid, say to $34 a share or even $40 a share, the company has to argue that its core business and holdings in Alibaba are worth more. That case gets a lot harder if Alibaba further distances itself from Yahoo and ensures its independence. Alibaba is prime real estate that Yahoo could even have to divest if Microsoft acquired the company.  Yahoo owns about 39 percent of Alibaba.

Good luck getting to $40 a share from Microsoft with those moving parts.

Yahoo CEO Jerry Yang made it clear in his recent shareholder letter that the company views its holdings abroad as one of the reasons it is worth more. In the letter, Yang said:

We have the added value of our substantial, unconsolidated investments in Japan and China. We have substantial positions in Yahoo! Japan, the leader in its market, and Alibaba, which is strongly positioned in China, a market with enormous growth potential.

If Alibaba arranges more independence from Yahoo in the event of a Microsoft merger a nice chunk of that added value goes kaput. And along with it goes the argument that Yahoo is worth more than $31 a share.

Larry DignanLarry Dignan is Editor in Chief of ZDNet and Editorial Director of ZDNet sister site TechRepublic. See his full profile and disclosure of his industry affiliations.

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  • Talkback
  • Most Recent of 32 Talkback(s)
RE: Uh oh. Yahoo's Alibaba is antsy about Microsoft; Good luck getting to $40 a share
FLV to MOV Mac, an all-in-one ,Mac video converter, is specially designed for Mac users to convert FLV files to MOV for playing on the media player or p... (Read the rest)
Posted by: snjn Posted on: 06/07/09 You are currently: a Guest | | Terms of Use
Interesting. The hostile takeover is in itself reducing the value of Yahoo  DonnieBoy | 02/16/08
LOL! You are really working on the spin, these days  GuidingLight | 02/16/08
Again, not my spin. I did not tell this company that MS is evil, they  DonnieBoy | 02/16/08
They figured out MS won't go along with censoring everything.  No_Ax_to_Grind | 02/16/08
No, it is not that complicated. They just do not want to work with the  DonnieBoy | 02/16/08
Here are the lkinks showing what Google turned over to the govenment  GuidingLight | 02/17/08
It's googles jpob to be a parent and filter the Internet (for Americans)?  B.O.F.H. | 02/17/08
Not at all  GuidingLight | 02/18/08
Actually, Microsoft censors a lot in China.  B.O.F.H. | 02/16/08
By the way  GuidingLight | 02/16/08
Not sure what that has to do with a company in China that does not want to  DonnieBoy | 02/16/08
I wonder why MSN  xuniL_z | 02/17/08
It is only that MSN is the default for Windows, and it automatically loads  DonnieBoy | 02/17/08
The numbers are a little bit different than what you think.  B.O.F.H. | 02/17/08
It was just an observation early on  GuidingLight | 02/17/08
Still, it was a short outage at a small startup that Google bought. I do  DonnieBoy | 02/17/08
Side stepping the comment at hand, as usuall  GuidingLight | 02/17/08
No excuse for service outages, but, you are trying to make a mountain out  DonnieBoy | 02/17/08
But, wait, you told us that Linux and BSD are junk. How could anybody build  DonnieBoy | 02/17/08
When did I say that BSD and Linux are junk?  GuidingLight | 02/18/08
You can chime in any time and tell us why MS failed so miserably in search.  DonnieBoy | 02/18/08
Chime in and tell us why Google failed so miserably in Office apps  GuidingLight | 02/18/08
Google has only been in office applications a very short time, compared to  DonnieBoy | 02/19/08
*Yawn*. Very well  GuidingLight | 02/19/08
Message has been deleted.  B.O.F.H. | 02/16/08
Why beleive it is something unheard of?  GuidingLight | 02/17/08
Pretty funny  croberts | 02/16/08
Keep in mind  No_Ax_to_Grind | 02/16/08
Microsoft is not leaving the Chinese matket and this is a Yahoo parner.  B.O.F.H. | 02/18/08
So much for this buyout attempt  zkiwi | 02/17/08
RE: Uh oh. Yahoo's Alibaba is antsy about Microsoft; Good luck getting to $40 a share  qprouk1@... | 02/19/08
RE: Uh oh. Yahoo's Alibaba is antsy about Microsoft; Good luck getting to $40 a share  snjn | 06/07/09

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