After narrowly avoiding a takeover bid by Microsoft, Yahoo! Inc. now has a bigger problem to take care of. On the closing day of the trading session, Yahoo’s shares went down by 15%. Just about two days ago, Yahoo! had declined Microsoft’s takeover bid of $33 a share stating that Yahoo! would not entertain any bid below the rate of $37 a share.

According to the Associated Press, the massive plunge was more than enough to erase nearly half of the gain that Yahoo! Inc. had earned since Microsoft’s initial bid on January 31^st 2008. There is a depreciation of about $14 billion in the market value of Yahoo! compared to Microsoft’s final bid of $47.5 billion. At the time of the negotiations with the possibility of a deal, Yahoo’s shares were valued at $28.67 a share. However, as soon as Microsoft withdrew its offer, Yahoo’s shares immediately fell by $4.30 per share and closed at $24.37 a share at the closing of Monday’s trading session. Although Microsoft suffered a minor loss of 16 cents or 0.6% closing at $29.08, it didn’t really bother Microsoft much.

According to many analysts, if Yahoo! continues to struggle and if its shares plunge any further, then Microsoft might see an opportunity and again approach Yahoo! with a takeover bid. With this thought in mind, it is widely believed that Yahoo’s share would not go the pre-bid price of $19.18 a share.

However, if there is one entity that has come out on top with this fiasco, it would be Google. Google has managed to kill two birds with one stone. Not only it has been able to find a platform to forge an alliance with Yahoo!, it has also been successful in thwarting a takeover attempt of Yahoo! by Microsoft. By the time the markets closed, Google’s shares had skyrocketed to $13.61 a share, up by 2.3% and closed at an astounding $594.90.

Standard & Poor’s equity analyst Scott Kessler said, “This squarely puts the pressure on Jerry Yang to deliver results and shareholder value. You are going to see a lot of shareholders just throwing in the towel because they are going to realize it’s going to take awhile for the stock to get back to where it was Friday."

Darren Chervitz, co-manager of the Jacob Internet Fund (Yahoo! Stockholder) said, “Clearly there’s frustration. I am not even sure if Yahoo cares about its shareholders because they didn’t show much regard for shareholders’ best interests in this process."

Yahoo! CEO Jerry Yang while commenting on Microsoft’s withdrawal said, "We clearly indicated to Microsoft that we were open to a transaction but only if it were on terms that fully recognized the value of Yahoo and was in the best interests of our stockholders."

Jerry Yang now desperately has to come out with a plan that can save Yahoo! Inc. and save his job as well. Additionally, he would have to give Wall Street a rock solid reason for his decision to rebuff Microsoft’s takeover bid.

It is now a game of tactics and time and there are a lot of livelihoods, money and reputations at stake too.

This entry was posted on Thursday, May 15th, 2008 at 12:52 am and is filed under Search Optimization. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.