Microsoft Presses Yahoo on Deal
Friday, April 25, 2008
Microsoft yesterday reported strong quarterly earnings and warned that there is no reason to raise its bid for Yahoo and that "speed is of the essence" for completing a deal.
Microsoft, the world's largest software maker, has been trying to acquire Yahoo since January in an attempt to bolster its lackluster online advertising business, a field that has been dominated by Google. Microsoft officials reiterated yesterday that the firm could simply walk away from the table.
While Yahoo has repeatedly rejected the offer, insisting Microsoft's $31-a-share bid is too low, Microsoft's Chief Financial Officer Chris Liddell yesterday chided Yahoo for harboring "unrealistic expectations of value."
He noted that Yahoo's share in the lucrative Web search market has been declining against Google and that its profit has dropped. Of the various arguments that have been made for raising Microsoft's purchase price, he said, " 'just because we can afford to' is not one I favor."
Liddell said that Microsoft could simply withdraw the purchase proposal and that Microsoft's "alternatives" would elaborated next week. With or without Yahoo, he said, Microsoft would be "focused on the online advertising market."
The comments came during a conference call in which Microsoft said it had $4.41 billion in profit (47 cents a share) during the quarter, a drop of 11 percent from the corresponding period a year earlier. But this quarter's results were affected by a $1.4 billion fine from the European Commission for failing to comply with an antitrust order.
Revenue was $14.45 billion, up from $14.40 billion in the corresponding quarter a year earlier.
Shares of Microsoft closed up 35 cents yesterday, at $31.80. Earnings were announced after the market had closed.
The company's financial performance was led by its major businesses: personal computer operating systems, office productivity programs and other business products.
Its entertainment division was buoyed by strong sales of the Xbox 360 consoles, whose sales surpassed 19 million during the quarter.
"Our third-quarter results demonstrate the benefit of our diversified business model," Liddell said.
Yesterday's report underscored the reason Microsoft is seeking Yahoo: Despite the company's overall strength, its online services division continues to lose money as it struggles to compete against Google for new markets in Web services and advertising. Microsoft noted that revenue for the division had grown 44 percent, however.
Since January, the two companies have sought to improve their negotiating positions. Yahoo recently announced a potentially valuable partnership with Google in its attempt to fend off Microsoft. It was unclear how Microsoft's earnings report will affect the negotiations, analysts said.
Meanwhile, Microsoft chief executive Steve Ballmer has alternately signaled his willingness to walk away from the deal or to force it by initiating a proxy battle for a new slate of Yahoo directors. The company has set a deadline of Saturday for Yahoo to accept its offer.