Paul Kedrosky: Yahoo's Response to Microsoft's Response to Yahoo

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May 3, 2008

Yahoo's Response to Microsoft's Response to Yahoo

This is rapidly turning into two post-tryst teens texting one another hate messages -- u suck! no, u suck! -- but Yahoo is now out with a response to Microsoft's response about its decision to terminate its takeover offer for Yahoo. Here is the release in its entirety:

Yahoo! Issues Statement in Response to Microsoft
SUNNYVALE, Calif., May 03, 2008 (BUSINESS WIRE) -- Roy Bostock, Chairman of Yahoo! Inc. (Nasdaq:YHOO), a leading global Internet company issued the following statement today in response to Microsoft Corporation's announcement that it has withdrawn its proposal to acquire Yahoo!:

"We remain focused on maximizing shareholder value and pursuing strategic opportunities that position Yahoo! for success and leadership in its markets. From the beginning of this process, our independent board and our management have been steadfast in our belief that Microsoft's offer undervalued the company and we are pleased that so many of our shareholders joined us in expressing that view. Yahoo! is profitable, growing, and executing well on its strategic plan to capture the large opportunities in the relatively young online advertising market. Our solid results for the first quarter of 2008 and increased full year 2008 operating cash flow outlook reflect the progress the company is making. Today, Yahoo! has:

-- a refined strategic focus to drive enhanced volume and yield;

-- reorganized to focus its efforts on its most promising products and services;

-- invested in innovations designed to revolutionize display advertising and facilitate closing the competitive gap in search; and

-- enhanced expense and resource management to support improved profitability."

Jerry Yang, co-founder and chief executive officer, Yahoo! Inc. added, "I am incredibly proud of the way our team has come together over the last three months. This process has underscored our unique and valuable strategic position. With the distraction of Microsoft's unsolicited proposal now behind us, we will be able to focus all of our energies on executing the most important transition in our history so that we can maximize our potential to the benefit of our shareholders, employees, partners and users."

Sure, shareholders thought they could get more money out of Microsoft, but did a quorum really believe they could get $37 a share, after Microsoft already offered its sizable original premium and offered to up the bid to $33-ish?

All in all, this strikes me as a fairly unsubtle example of whistling past the graveyard. Come on, the quarter was no hell, and promising a better 2008 is a lovely fantasy, but not exactly grounded in the real world. The rest of the "progress" cited in this note gives the word "vague" a bad name.

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