Microsoft and Yahoo: The end of a chapter

yahoobillboard The tech business news this weekend has been all about the collapse of the Microsoft takeover bid for Yahoo.

Every shade of opinion on what it all means has been offered during the past 24 hours, as the Techmeme bubble can attest.

Here in the UK, it’s been a top headline news item on the hour every hour on TV and radio news throughout the whole of Sunday, thus making it of mainstream interest that can reach anyone with a TV or radio.

In essence, Microsoft says it is walking away from its 11th hour upwardly-revised financial offer to acquire all of Yahoo for $33 per share, or a total price of about $50 billion (about £25.3 billion).

You can read plenty of commentary and opinion, much of it well written, about the reasons for the ending of this putative deal and what might happen next.

And lots of interesting thoughts from people whose voices are getting more attention via devices like FriendFeed, thanks to people like Robert Scoble riding the edge.

One comment that’s consistent almost everywhere you look is the view that many of Yahoo’s shareholders and investors will very likely not be happy at all with this outcome.

That was one of my first thoughts this morning when I saw the news.

Why? The letter yesterday from Microsoft’s Steve Ballmer to Yahoo’s Jerry Yang includes this comment:

[...] I still believe even today that our offer remains the only alternative put forward that provides your stockholders full and fair value for their shares. By failing to reach an agreement with us, you and your stockholders have left significant value on the table.

I guess the first public signs of how the market feels about this will be the NASDAQ (where Yahoo’s stock is listed) when it opens for a new week’s business tomorrow.

As for what’s next, I think this will be a very interesting business battle. Marc Andreessen’s detailed analysis of events prior to the bid collapse, posted on April 28, includes his views on five possible scenarios.

Now that we’re at the walk-away stage, this scenario could be the outline for what further developments might look like:

Walk Away: Microsoft drops its offer and walks away; Yahoo’s stock drops to its pre-offer level of $19.18, give or take. Lots of moves and countermoves could follow: Microsoft could come back later with a lower or higher offer; Yahoo could cut a Google advertising deal to boost its revenue and margins and make itself harder to buy; Microsoft could take its $44 billion and go buy virtually every new Internet company of any consequence founded in the last 10 years; etc.

Add Yahoo employees to this scenario – trying to hold on to key employees and keep everyone focused must be a major objective of Yahoo’s leaders.

So things are likely to get pretty interesting.

No question that we’ve not finished reading writing the book yet, purely completed a chapter.

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