Microsoft pulls out - what's next for Yahoo?

May 4, 2008 12:00:00 AM PDT
Yahoo shareholders could be in for a rude awakening after Microsoft dropped its offer to buy the company.

Yahoo CEO and founder Jerry Yang will have a daunting challenge as he tries to prove his company is worth more than the $47.5 billion Microsoft was willing to pay. Experts are predicting some big changes for Yahoo.

Yahoo Stock is expected to nosedive when the market opens after Microsoft is walked away from a takeover deal.

In a letter Saturday, Microsoft said it was willing to pay $33 a share for Yahoo, while Yahoo was demanding at least $37. Now, some Yahoo shareholders are now revolting and several lawsuits have already been filed because Yahoo refused to make a deal.

Analysts say if Yahoo stock tanks, Microsoft could try once again to buy the company, but at a cheaper price. Either way, there is a lot of pressure now for Yahoo to step it up in the coming months.

"If Yahoo does very well, it may very well just stand alone as a thriving company or Microsoft or someone else could come back to it with a more generous offer. If Yahoo doesn't do well, then Microsoft could come back and Yahoo stockholders could force management to take the deal," says technology expert Larry Magid.

Yahoo is experimenting with an ad-sharing program with Google. Executives are still talking about a more formal partnership, but there is danger it could create a monopoly. Google controls about 60 percent of the search engine market. Together with Yahoo, it would be eighty percent.

As for Microsoft, analysts say the company may now be exploring possible deals with other large internet companies since the Yahoo deal fell through.

Companies being mentioned are AOL, MySpace, FaceBook and Linked-in.

Microsoft already owns 1.6 percent of FaceBook, the second-largest social network behind MySpace.


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