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April 24, 2008 4:09 PM
Posted by Benjamin J. Romano
Microsoft CFO Chris Liddell addressed the biggest outstanding issue facing his company during its third-quarter earnings conference call this afternoon: the bid to acquire Yahoo. He gave one of the strongest indications yet that Microsoft is considering abandoning the deal.
Liddell's comments, in part:
"With respect to Yahoo, we've been clear, as evidenced in the size of our offer premium, that speed is of the essence for the deal to make sense and get folded into our online strategy. Unfortunately, the transaction has been anything but speedy and has been characterized by what would appear to be unrealistic expectations of value.
"Our initial offer was an extremely generous, more than 100 percent premium to Yahoo's core business. And our view on value is shaped by the long-term value of the company and we intend to remain disciplined in our approach. The strongest argument that I've heard on on why we should increase our bid -- simply that we can afford to -- is not one that I favor.
"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 earnigns call on Jan. 29, after which their stock price closed at $19.05, and Wall Street analysts' consensus on value was significantly decreased.
"As outlined in our recent letter to the Yahoo board, unless we make progress with Yahoo towards an agreement by this weekend, we will reconsider our alternatives. We will provide updates as appropriate next week.
"These alternatives clearly include taking an offer to Yahoo shareholders or to withdrawal our proposal and focus on other opportunities both organic and inorganic."