Microsoft and Yahoo!'s war of open letters waged on over the weekend, after two months of minimal direct communication between the two companies.
Microsoft CEO Steve Ballmer fired the first shot Saturday, with a letter addressed to the members of Yahoo's board that opened:
It has now been more than two months since we made our proposal to acquire Yahoo! at a 62% premium to its closing price on January 31, 2008, the day prior to our announcement. Our goal in making such a generous offer was to create the basis for a speedy and ultimately friendly transaction. Despite this, the pace of the last two months has been anything but speedy.
The letter goes on to lament the lack of interaction between the two companies, "despite the fact [Microsoft's] proposal is the only alternative put forward that offers [Yahoo!] shareholders full and fair value for their shares, gives every shareholder a vote on the future of the company, and enhances choice for content creators, advertisers, and consumers," Ballmer wrote.
Buzz up!on Yahoo!
In the meantime, Ballmer added, with the slowing economy, Yahoo's value has declined, making Microsoft's proposal, "even more significant today."
Ballmer's letter closed with a less than friendly ultimatum:
If we have not concluded an agreement within the next three weeks, we will be compelled to take our case directly to your shareholders, including the initiation of a proxy contest to elect an alternative slate of directors for the Yahoo! board. The substantial premium reflected in our initial proposal anticipated a friendly transaction with you. If we are forced to take an offer directly to your shareholders, that action will have an undesirable impact on the value of your company from our perspective which will be reflected in the terms of our proposal.
Yahoo! fired back this morning with a letter addressed directly to Ballmer.
"Our board carefully considered your unsolicited proposal," it opened, referring to a similar letter sent by Ballmer January 31, but "unanimously concluded that it was not in the best interests of Yahoo! and our stockholders, and rejected it publicly on February 11, 2008. Our board cited Yahoo!'s global brand, large worldwide audience, significant recent investments in advertising platforms and future growth prospects, free cash flow and earnings potential, as well as its substantial unconsolidated investments, as factors in its decision."
Yahoo! isn't opposed outright to Microsoft's offer, according to the letter signed by CEO Jerry Yang and chairman of the board Roy Boystock. Their "position is simply that any transaction must be at a value that fully reflects the value of Yahoo!, including any strategic benefits to Microsoft, and on terms that provide certainty to our stockholders."
In the time that has elapsed since the January letter, Yahoo! insists that their position hasn't changed and despite Ballmer's assertions, the company's value has actually grown in the last few months.
As you know, we recently reaffirmed our Q1 and full year guidance, which is a testament to our ability to perform in line with our expectations despite the current economic environment. In addition, our three-year financial and strategic plan which we have made public demonstrates significant potential upside not previously communicated to the financial markets. This plan has received positive feedback from our stockholders, further strengthening the view that Yahoo! is worth well more as a standalone company than the value offered in your proposal, and would be even more valuable to Microsoft. Your own statements have made clear the strategic importance of Yahoo!'s substantial assets and capabilities to Microsoft.
"We consider your threat to commence an unsolicited offer and proxy contest to displace our independent board members to be counterproductive and inconsistent with your stated objective of a friendly transaction," Yang and Bostock wrote. "We are confident that our stockholders understand that our independent board is best positioned to objectively and knowledgeably evaluate our company's alternatives and to maximize value."
