According to a report in The New York Post, Capital Research and Management, a giant investment company that owns 11.4 percent of Yahoo, met with Steve Ballmer yesterday to find out just how high Microsoft is willing to go in its effort to acquire Yahoo. Since Microsoft first announced their $44.6 billion bid for Yahoo a week ago, shares of the software giant have slipped around 10 percent, meaning that the offer has lost around $4 billion of value.
Over the past week, the general consensus has been that many top Yahoo execs aren’t particularly excited about the prospect of joining Microsoft. Nonetheless, no other bidders have emerged, and the only alternative seems to be outsourcing search to Google, which would drive up Yahoo’s revenue in the near-term, but essentially mean that the company is throwing in the towel in its effort to be a serious search competitor.
My guess is that if Yahoo asks for more money, Microsoft will oblige. While their initial bid was already a 60 percent premium to where Yahoo was valued, there is simply no other way for Microsoft to gain serious market share in search. Remember that Microsoft paid nearly a 100% premium to get aQuantive as the online ad market consolidated last Spring following Google’s acquisition of DoubleClick.
