Microsoft may or may not have raised its bid for Yahoo

By Scott M. Fulton, III | Published May 1, 2008, 12:00 PM

There may, in the end, be a gap of at least four dollars per share between what Microsoft thinks it might possibly, perhaps, be willing to pay, and what Yahoo's shareholders definitely would like to see. Suddenly Redmond is looking soft.

During the founding days of America, one way for its first citizens to communicate indirectly with prospective business partners, while at the same time influencing the public markets, was by taking out notices in newspapers. These earliest editions were often tacked to public posts.

Today, the modern equivalent of a big pine log with metal tacks all through it in the middle of the town square, is The Wall Street Journal. Late yesterday, its online service apparently briefly posted -- presumably on behalf of Microsoft -- that the company was willing to raise its bid for Yahoo from $31 per share to at least $33, perhaps as high as $35. Immediately, blogs whose principal sources include WSJ Online reported that Microsoft was raising its bid.

Presently, that little bid-raising announcement appears to have been taken down, or at least pasted over with a notice that was much fuzzier, saying Microsoft "this week indicated a willingness to raise its bid to as much as $33 per Yahoo share," citing "people with knowledge of the situation" as its source.

This morning, The New York Times appears to have corroborated that version of the story with at least one source, who the Times said requested anonymity due to not actually having been authorized to reveal the information.

But apparently that willingness, if it does exist "among" Microsoft's board, doesn't appear to have permeated it entirely. The current version of the story, which now relies almost completely on controlled leaks through nationwide press sources, is that Microsoft's board emerged from its meeting yesterday afternoon without a resolution on raising its bid.

So as it stands now, the WSJ story aside, the official line from Microsoft is that the original bid stands, at an adjusted value since February of just over $29 per share, down from $31. Multiple press sources including the WSJ are saying major Yahoo shareholders (without indicating whether they are also board members) would prefer a bid raised to the level of $35 - 37 per share, in order to signal what its CEO Jerry Yang has characterized as a full valuation of the company. Microsoft CEO Steve Ballmer indicated as early as his initial February 1 public bid that his company isn't interested in Yahoo's complete assets, just its employees and shareholders.

An earlier version of the WSJ story cited by at least one blog earlier yesterday, but since revised at least twice, had said that Bear Stearns CEO Alan Schwartz was personally involved in lobbying efforts for Yahoo shareholders on Microsoft's behalf.

You may recall that Bear Stearns is the financial firm that succumbed to the credit crisis last March, and that had to be rescued through a JP Morgan buyout for a shockingly small fraction of what it was worth. Still, even at fire sale prices, the US Federal Reserve bank reportedly granted JP Morgan $30 billion in credit to effectuate that takeover, in what a former Fed director called on Tuesday, "the worst policy mistake in a generation." That quote appeared in an interview in, ironically enough, The Wall Street Journal.

The New York Times has been Yahoo's medium of choice for issuing responses to Microsoft; and so far, no such response has been seen there, despite its publication of a story on the matter this morning.

Comments