By Andrew Keen
Back in February, I wrote in my Independent column that Yahoo! was a shipwrecked internet company. The events over the weekend add to the drama of the Yahoo! shipwreck. So what has happened to make Yahoo! the Titanic.com of Silicon Valley?
Three months ago Microsoft made an unsolicited offer of $31 per share to acquire Yahoo!, making the Sunnyvale, CA company worth over $44 billion. Not a bad deal, really, for a company that has been the perpetual runner-up in every race it has ever entered (e-commerce, search, music, portaldom, web 2.0, social networking etc etc). Their reasoning was obvious:
Microsoft + Yahoo! = close to Google (or, at least, closer...)
Yahoo! rejected the Microsoft offer, arguing that its stock was worth north of $40 per share. Late last week, the two sides seemed to be edging toward a compromise. Microsoft upped their offer to $33 and Yahoo! came down to $37. The $4 difference between the parties amounted to around an $8 billion - not really a huge sum to Microsoft with its market cap of $279 billion. But the two sides failed to settle on a price between $33 and $37 per share and, on Saturday night, Steve Ballmer, Microsoft's CEO, withdrew his offer.
And so Titanic.com struck its iceberg. Already this morning, Yahoo!'s stock price has fallen 20 per cent, to under $24 per share. Expect shareholder law suits against Yahoo! CEO Jerry Yang for failing to negotiate a compromise price with Microsoft. And, as Yahoo!'s value continues to plummet, expect Microsoft to re-enter the bidding and snap up the mortally injured company for significantly less than $33 per share.
Maybe the incredibly short-sighted Jerry Yang really is the second-coming of Edward John Smith - the tragically indecisive captain of the Titanic.
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