March 28th, 2008
What's Yahoo worth to Microsoft without Alibaba?
One of Yahoo’s best arguments for getting Microsoft to raise its offer to acquire the company–the portal’s stake in Chinese e-commerce giant Alibaba–is in jeopardy courtesy of antitrust regulations in China.
The New York Times reported Friday that a Chinese monopoly law that goes into effect in August could likely throw a roadblock in front of Microsoft’s bid for Yahoo.
The law, which goes into effect on Aug. 1, is intended to strengthen an existing set of antitrust regulations the Chinese originally established in 1993. It will make China a third sphere of regulatory influence, matching the power of the European Union and the United States, according to legal specialists in this country and in China who have studied it.
If Chinese authorities raise any objections to Microsoft’s acquisition of Yahoo–and they will because hometown favorite Alibaba is against the purchase–the argument that Yahoo is worth more than $31 a share becomes laughable. In fact, you could argue that Yahoo is worth less than $31 a share. In its pitch to investors arguing that it’s worth more, Yahoo figured that Alibaba was worth $2.25 a share and had a market value of $3.2 billion.
What happens if Alibaba is removed from the equation? Given that Microsoft is already a regulator whipping boy in the EU it may not want to tussle with China too–especially if Alibaba management doesn’t want to deal with the software giant.
Bottom line: Microsoft isn’t likely to lower its price, but these China regulator concerns mean that the company isn’t about to raise its bid any time soon.
Larry Dignan is Editor in Chief of ZDNet and Smart Planet as well as Editorial Director of ZDNet sister site TechRepublic. See his full profile and disclosure of his industry affiliations.
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