Proxy Fight?! Could be

In what is the last thing that Yahoo needs it looks like they may have a proxy fight on their hands. As we detailed previously, Yahoo cannot afford the distraction of either a protracted proxy fight or a drawn out board room battle. In a sense neither can Microsoft. Yes M$ has oodles of cash and can wait a corporate siege. But in the marketplace, its opportunity to realize ’software+services’ is a losing one. And if the marketplace coalescences around a Google-Sun-Open Source matrix the opportunity to be in the game may close while they are counting proxies. –

Hours after Yahoo officially rejected Microsoft’s takeover offer on Monday, calling it too low, Microsoft described Yahoo’s response as “unfortunate” and said its own proposal was “full and fair.”

Microsoft’s statement suggests that, at least for now, the company is not willing to raise its price. Microsoft also indicated anew that it was ready for a fight, repeating earlier statements that it might consider “all necessary steps” to ensure the deal is completed.

Experts said Microsoft could ratchet up pressure on Yahoo’s board by taking its offer directly to shareholders and waging a proxy fight to oust Yahoo’s directors; it has until March 13 to nominate a new slate of directors.

Earlier in the day Yahoo said Microsoft’s bid “substantially undervalues Yahoo including our global brand, large worldwide audience, significant recent investments in advertising platforms and future growth prospects, free cash flow and earnings potential, as well as our substantial unconsolidated investments.”

continuing …

“I think Microsoft has made it pretty clear that they are not about to back off here,” said Ryan Jacob, portfolio manager for the Jacob Internet Fund, which counts Yahoo among its top holdings. Mr. Jacob, whose fund has about $60 million in assets, said he favored a combination of Yahoo and Microsoft, as it would create a stronger competitor to Google. But he defended Yahoo’s initial rejection, saying the board was right to hold out for a higher offer.

Microsoft suggested that Yahoo shareholders it had polled viewed the deal favorably. “Based on conversations with stakeholders of both companies, we are confident that moving forward promptly to consummate a transaction is in the best interests of all parties,” Microsoft said. Many Yahoo shareholders are also Microsoft shareholders and might not necessarily favor a higher offer.

And Yahoo’s options seem to lessen every day…

Yahoo’s CEO and founder Jerry Yang is in a tough spot: find a better solution or wheedle a better price out of Microsoft. And the latter solution seems like the likeliest scenario.

Last week, Microsoft seemed to have landed a knockout punch, says Jeffrey Lindsay, a senior analyst at Sanford Bernstein. Now, it seems that Yahoo has gotten off the deck and is fighting back. Still, after years of management missteps and sagging stock price, Yahoo’s options appear limited.

No white knights are likely to save Yahoo. Very few companies have the hefty amounts of cash needed to nab an expensive prize like Yahoo.

Google cannot step in because a Yahoo-Google merger would likely be considered a violation of antitrust regulations, considering that Google practically owns the search ad market. Rupert Murdoch’s News Corp., which wanted to buy a 25 percent share in Yahoo last June, is probably not interested in the entire company, say analysts.

ThirdPipe keeps saying move to the SMB services market Yahoo. Think outside of the internet industry, get in bed with ADP, GrandThronton, and other business service providers. It one of your few options.

NYT article.
MSNBC observations.