Transcripts

Microsoft Bails on the $42B Yahoo! Bid

JEFF YASTINE: The collapse of merger talks between Microsoft and Yahoo! has investors wondering what's next for those companies. Late today, Yahoo! CEO Jerry Yang told Reuters to listen if Microsoft has anything new to say. On Saturday, Microsoft dropped its bid for Yahoo! because Yahoo! wanted more than the $47 billion on the table. As Erika Miller reports, now the pressure is on the Yahoo! board.

ERIKA MILLER, NIGHTLY BUSINESS REPORT CORRESPONDENT: The breakdown of talks with Yahoo! brings Microsoft back to square one. The software giant has been trying for years to win a bigger slice of online advertising dollars. But UBS analyst Heather Bellini says the company probably cannot achieve that goal by going it alone.

HEATHER BELLINI, SOFTWARE ANALYST, UBS: We definitely think they need to get more aggressive in expanding partnerships. They need more they essentially need more advertisers. They need to increase their search share. They need to increase the relevancy of their searches and they need to do that by getting more scale.

MILLER: UBS has done business with Microsoft over the past year and Bellini owns shares of the company. Many analysts believe Microsoft could make a play for another Internet search company, like AOL, a unit of Time Warner. S&P's Scott Kessler also thinks myspace, the social networking site owned by Newscorp, could be a potential target.

SCOTT KESSLER, INTERNET ANALYST, STANDARD & POOR'S: Right now it's interesting because both AOL and myspace are both working very closely with Google. And so Microsoft not only wants traffic, but wants to take share. You kind of have a double whammy if you were able to do something with one or two of those types of properties.

MILLER: Analysts say a big risk for Microsoft is that Yahoo! could sign a search advertising agreement with Google, something it recently tested. However, experts caution such a partnership would face serious regulatory hurdles. Many analysts think Yahoo! made a big mistake rejecting Microsoft's sweetened offer. Some think the company should start buying back shares to boost its stock price.

KESSLER: My suggestion to Yahoo! executives and Yahoo!'s board is to basically walk the walk. You've talked the talk about $37 a share being a minimum value for Yahoo! stock. So, now go ahead, take that cash balance that you have and commit it to buying new shares.

MILLER: Right now, most analysts don't think Microsoft will raise its bid for Yahoo! But they say it's possible Yahoo! shareholders could pressure that company's board to revisit Microsoft's offer. Erika Miller, NIGHTLY BUSINESS REPORT, New York.