Microsoft bids 3 Facebooks for Yahoo!
I’m not going to go into depth on the news that Microsoft has bid $44.6 billion as it will be covered (to death) in a million and one places (and I don’t really have time to write any kind of blog post as I have two interviews this afternoon, a report to write and a load of calls to return).
I just wanted to make a few observations:
- as I’m sure other people have noted the valuation put on Yahoo! is almost exactly 3 times the crazy extrapolated Facebook valuation
- the half-cash / half-shares offer uses more than half of Microsoft’s total cash pile - which I think has to be a good thing in terms of proving that they are putting their money where their mouth is (mouths are?) about being serious that they are going to compete with Google
- this isn’t just about search. It’s easy to think it is from within the SEO world, but remember that Yahoo! is more than a search engine (thankfully!) and presumably Microsoft has plans for pretty much all of it.
I’m going to end with a graph of (rebased) share prices for MSFT, YHOO and GOOG over the last year. I’m not sure exactly what implications to draw from it (I’m not a corporate finance specialist) but I think it’s interesting:
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David Mihm on Fri (1 Feb) @ 3:47 pm
Will, you win the award for best title on this story!! I couldn’t help but click through from my reader. What a shock to wake up to over here across the pond.
Your graph is REALLY interesting. If only that were share of searches and not stock price…
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Christophe on Fri (1 Feb) @ 4:01 pm
Some people might not realize how “expensive” it is, here are some numbers:
Microsoft :
- 2006 Net Income : $12.6 billion
- 2007 Net Income : $14.06 billion
- Shares : 9.31 billion
- A single share price (as I’m speaking) : $30.91
Correct me if I’m wrong, but paying half of $44.6 billion ($22.3 B) in cash is worth almost two years of their net income.
But $22.3 B in shares is “only” worth 0.077% of Microsoft capitalization (22.3/(9.31*30.91)).
That’s big.
I can perfectly remember Google buying Youtube only with stocks transaction, in October, 9th 2006. A GOOG share was worth $295 (with 42M shares). Three weeks later it was valuated $390 (with 57M shares). The usual “money creating money”.
You’re right, Microsoft is serious on this. Let’s see what will happen next…
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Will Critchlow on Fri (1 Feb) @ 4:06 pm
@David: thanks
@Christophe: You are right about the cash (i.e. 2 years’ net income). That is a big deal. The shares are 7.7% I think - you need to multiply by 100… But still, your point stands (especially money creating money).
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Christophe on Fri (1 Feb) @ 4:09 pm
Absolutely for the *100 … maths and the obvious …
Yeah that’s a great title by the way