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T-minus 1 Day: Last Minute Rhetoric from Microsoft and Yahoo

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On yesterday's earnings call, Chris Liddell, Senior VP and CFO, affirmed recent statements by Steve Ballmer to focus on the online advertising market. He said that the strategy was based on three pillars:


  • To drive innovation and search

  • To increase value to advertisers and publishers

  • To grow user engagement across MSN and Windows Live properties

Liddell said that Yahoo would accelerate that strategy. But later, he made this statement:

We've yet to see tangible evidence that our bid substantially undervalues the company. In fact we see the opposite.

Yahoo continues to lose search share and profitability continues to decline year-on-year. The results that they announced on Tuesday were in line with the guidance that they gave on their last earnings call on January 29, after which their stock price closes at $19.05 and Wall Street analysts' consensus on value was significantly decreased.

Just how is Microsoft expected to accomplish their three pillars if Yahoo is as awful as they say?

Perhaps Liddell and Ballmer are beginning to ponder that exact question. Earlier this week, Ballmer suggested that Microsoft would go forward without a merger. During yesterday's call, Liddell suggested that an alternative to Yahoo's “no” is to withdraw the proposal.

Meanwhile, Yahoo remained consistent in what they've been saying all along – that they're worth more than Microsoft's original offer. Speaking on Yahoo's earnings call on Tuesday, CEO Jerry Yang reinforced his confidence in the overall value of his company:

Yahoo! has a unique and valuable combination of assets that include our global brand, our large worldwide audience, our leadership in online advertising, our strategic positions in Asia, our mobile and emerging market franchises, and our scales, tools, and technology.

Yang stated that Yahoo's Q1 revenues were particularly remarkable in the light of uncertainty caused by Microsoft's unsolicited offer. He also said that Yahoo remains open to its options, including a deal with Microsoft.

Then Yang zeroed in on what he felt was his most important statement on the matter:

If you take only one thing away from this brief discussion, I hope it will be that our board and management are committed to choosing a path to maximize stockholder value and will not enter into any transaction that does not recognize the full value of this company.

Tomorrow, the ultimatum comes. Decisions will be made and actions will be taken. But the rhetoric still has just begun.


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