The Yahoo Bid
The NYTimes called this morning to ask about Microsoft’s bid for Yahoo; here is Joe Nocera’s story:
My basic response: what else can MS do with its cash hoard that will earn it more money? Not put it into stocks, or cash, or buy back shares. MS has become a cash generation machine, and one of its greatest challenges is the efficient use of cash.
With the numbers posted by the Aquantive division of MS last quarter, it is understandable that the company feels some confidence it may be able to accomplish the merger and make money doing it.
I certainly don’t see much of a path for Yahoo without some kind of combination, and if I were Yahoo’s directors I would take the money and run. The offer is being made as Yahoo falters in share, the CEO seems not to have had a secret plan after all, the first 1k in layoffs are beginning, and the U.S. clearly is in (not approaching) a recession.
It’s a good deal all around. It doesn’t matter, in the short run, whether MS can get Yahoo to beat Google, which is what all the pundits seems to be locked into discussing. What matters is whether the buy makes sense for MS, i.e., whether this will lead to a better use of cash, and increased earnings. I have no doubt the answers to both are Yes.