[SATLUG] Microsoft makes offer to buy Yahoo!

Ernest De Leon edeleonjr at gmail.com
Fri Feb 1 14:11:42 CST 2008


In this case, financial advantage isn't what they are after.  It is more of
a value investment play.  Because the stock fell so sharply, Microsoft will
pick it up at a discount (even after their premium offer) and use Yahoo to
redefine their online presence (which has been operating at a loss since
it's inception.)  It's the classic Warren Buffet investment, you find a good
company with battered stock.  The price does not always reflect the value
and Microsoft knows that they can monetize this failing business.  Warren
Buffet has even noted that in traditional economics (economists in general)
know the price of everything and the value of nothing.  This is why
Berkshire Hathaway is where it is today.  You should also note that
Microsoft is gradually diversifying over a broad range of areas a la
Berkshire Hathaway.  What we may see in the future is Microsoft becoming
more like GE or Berkshire Hathaway.  If Ballmer is truly able to turn Yahoo
around, the investment will pay off many times over and Google will have
some serious competition.  Competition is always good.

On Feb 1, 2008 11:39 AM, Bruce Dubbs <bruce.dubbs at gmail.com> wrote:

> This whole thing seems fishy to me.  $44B is far more than their
> available cash of $19B.  I don't know who really would want their (MSFT)
> stock that has been essentially flat since 2000.  They do pay a dividend
> of $0.44/year or about 1.25% of the cost of a current share -- about
> what my checking account pays.
>
> I guess the current owners could just sell any stock received at a
> profit and walk away, but I just don't see the financial advantages to
> the purchase.  I guess I'll have to ask my friends from Enron.
>
>  -- Bruce
>
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-- 
Ernest de Leon
http://www.smbtechadvice.com

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