Microsoft, Please Leave Yahoo! to Alibaba
The rumor on Wednesday was that Microsoft is considering making another bid to purchase Yahoo! However this was soon forgotten when it was announced that Apple co-founder Steve Jobs had died.
Today the Yahoo! share price is at $15.62, a far cry from Microsoft's February 2008 offer of $31 a share, which valued Yahoo at $44.6 billion. Today Yahoo's market cap of $19.8 billion sounds like a great bargain.
However no decision has been made by Microsoft and there are internal divisions on whether it should pursue Yahoo again.
One camp is hot for the deal, which they feel could create a strong web portal that can offer better products to audiences, advertisers and end users. Those against the deal feel that Microsoft should invest in something with more growth potential. "Yahoo's value hasn't grown in years, and some executives feel we should buy something that is more forward-looking," said one Microsoft executive who spoke on condition of anonymity.
Since Microsoft and Yahoo are now working together in search, it may well be that Microsoft is already getting all the added value to be realized from Yahoo without major investment. Microsoft may wish to be a stronger presence on the Internet, but this is not the way to get there.
Perhaps it would be best to leave Yahoo to a suitor who shows some ardor for the acquisition. One such is Internet tycoon Jack Ma who has declared he wants to buy Yahoo. He is the founder and chief executive of Chinese e-commerce giant Alibaba Group.
This would be a real turnaround for this rapidly growing company. Six years ago Yahoo invested $1 billion for a 40% stake in Alibaba, at the time when the Chinese upstart was in need of funding and technology know-how. Now Alibaba’s recent round of financing valued the company at $32 billion, meaning Yahoo’s stake is worth more than $13 billion.
Private equity firm Silver Lake and Russia’s Digital Sky Technologies – both participants in the latest Alibaba $800 million financing round – are said to be some of the investors Ma has been talking to about joining Alibaba in this bid..
Ma wants to buy back Yahoo’s stake in Alibaba but has always been rebuffed. Given Ma’s frosty relationship with ousted Yahoo boss Carol Bartz, he will definitely feel vindicated if he pulls this deal off. Some in the United States may have concerns about a major search entity being in Chinese hands, but it is only an extension of the many ways in which China and the US are partners.