Microsoft and Yahoo: Now what?
Microsoft's three-month
courtship of Yahoo has
ended but it changed both companies forever and neither can expect to return
to the way they were.
Microsoft and Yahoo will need to deliver on promises, address questions, reassess
and adjust plans and deal with challenges that grew from and during the attempted
acquisition.
"The key thing is that both companies are going to have to articulate
very clearly what their strategies going forward will be," said Forrester
Research analyst Charlene Li in a phone interview.
Yahoo has the most to prove and deliver upon, while facing a more uncertain
future.
"For Yahoo, this is a situation of 'Be careful what you wish for,'"
said industry analyst Greg Sterling of Sterling Market Intelligence in a phone
interview. "Yahoo's directors and management very strongly indicated that
they wanted to remain independent and now they get that opportunity."
First order of business for Yahoo will be to monitor its stock, which got a
boost after the acquisition bid and now faces a possibly negative reaction from
financial markets.
If the stock gets clobbered in the coming days and doesn't rebound, Yahoo could
find itself an acquisition target again from other suitors, and possibly under
less favorable conditions and terms.
Even if the stock holds up, it's still very likely that Yahoo will be pelted
with a flurry of lawsuits from shareholders that feel the company didn't look
out for their best interests when rejecting Microsoft's offer.
In addition, Yahoo will have to hustle to deliver on all the ambitious plans
and promises it made these past three months, and prove that it can indeed turn
its ship around as an independent company.
Financial analyst Clayton Moran from Stanford Group Company is pessimistic
about Wall Street's reaction to Yahoo and about the company's ability to significantly
improve its financial situation.
"Yahoo has missed an opportunity. We expect the stock to drop materially,"
he said in an e-mail interview.
Moran doesn't believe that in the coming 12 to 18 months Yahoo's stock will
reach the $37 per share value that the company wanted Microsoft to offer and
over which negotiations eventually broke down.
"Yahoo’s best alternative was to sell to Microsoft. As an independent
company, Yahoo has lost market share and struggled to grow cash flow. We suspect
these trends will remain intact for the foreseeable future," Moran said.
Beyond the potential financial turmoil, Yahoo will need to follow through on
the many lofty projects it has kicked off, such as its new AMP advertising management
platform and its Yahoo Open Strategy (YOS) for letting outside developers create
applications across its network of sites and services.
"Yahoo has some very ambitious plans they have announced these
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