Will Microsoft Raise its Bid for Yahoo... Or Lower It?
Via Alley Insider comes this note that Microsoft (NASD:MSFT) is undervaluing Yahoo(NASD:YHOO), at least according to Bear Stearns analyst Bob Peck.
Peck suggests that the offer would value Yahoo at about 15x:
At $2.1-$2.2 billion of EBITDA, Microsoft’s multiple would only be paying 15x for one of the leading Internet properties and online advertising player.
But, as Blodget points out, 15x is only cheap if you think that 2008 is an aberration and that Yahoo will return to strong growth in 2009.
Meanwhile, Kara Swisher at All Things D suggests that Microsoft might come back with a lower offer, especially following Yahoo's weak January results and their newly announced severance plan. Kara suggests that:
If signs of business weakness at Yahoo worsen, several people suggested to me that Microsoft should make a slightly lower offer for Yahoo and promise the difference between its old bid and new one to Yahoo employees as a rich retention plan.
In another twist, the New York Times ran an interesting piece this weekend suggesting that Microsoft should drop its pursuit of Yahoo altogether and go after SAP (NYSE:SAP). In that article, Randall Stross argues that Microsoft should look to increase its strong position in business software by making a bid for SAP, much in the way that Oracle has grown through its acquisitions of BEA, PeopleSoft and i-Flex, among others. The corporate culture and business focus of the two companies are much more closely aligned, reducing risk of the deal.
In a similar vein, RBC Capital Markets analyst Robert Breza writes that Microsoft would be better served going after some higher growth businesses with strong upside:
Salesforce.com (NASD:CRM) at 100 percent premium is $12 billion, Omniture (NASD:OMTR) at 100 percent premium is $3 billion; and that leaves $30 billion to acquire Facebook.
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