Microsoft may need first-ever loan in order to buy Yahoo
Wednesday, February 06, 2008 - 05:22 PM EST "As Yahoo waits in vain for other bidders or deal alternatives to emerge, the dissatisfaction of Microsoft investors with the Yahoo bid has reduced the value of Microsoft's offer to $29.50 a share," Henry Blodget reports for Silicon Alley Insider."Unless Yahoo shareholders are willing to accept a reduced offer, in other words, Microsoft could soon find itself in a sticky situation: The more Microsoft's stock drops, the more expensive the deal gets--because the company will have to reset the exchange rate to get the take-out value back to $31 a share. In so doing, it will increase dilution, leaving its existing shareholders holding a smaller percent of the combined company," Blodget reports.
"Microsoft shareholders are already unhappy with the proposal--and they're only going to get more unhappy as the deal gets more expensive. The more unhappy they get, the more the stock will drop, and the more the stock drops, the more expensive the deal will get, and so on," Blodget reports.
Full article here.
Electronista reports, "Despite its large cash reserves, the company's Chief Finance Officer Chris Liddell acknowledged that the $44.6 billion proposed deal might require that the firm borrow money and accumulate debt. While the $21 billion in reserves owned by the Windows developer would cover nearly all the cash portion of the proposed deal, a loan would help Microsoft avoid wiping out these reserves and leaving itself without options if it needs more cash in the near future, according to the executive."
Full article here.
John C. Dvorak writes for PC Magazine, "I don't think this merger would be a wise move for either company. First of all, their product lines are not very complementary. Moreover, the rationale of joining together to better compete with Google looks lame-brained, since neither company seems to have the wherewithal to do anything interesting as of yet. How do two companiesthat do not complement each other and have not shown the ability to be creative in competing with Google expect anything to change? As far as I can tell, this buyout is just throwing away the shareholders' money, and, to make matters worse, will potentially ruin both companies in the process."
MacDailyNews Take: Dvorak on his meds?
Dvorak writes, "If Yahoo! accepts this deal, it's the same as giving up and deciding to take the money and run. The principals of the company have plenty of capital and should reevaluate why they started Yahoo! in the first place. I'm certain that it wasn't so they could be bought by Microsoft and destroyed in the process. Then again, I'm sure there are a few less-moneyed individuals in the company (and on the board) who are looking to cash out rather than work for a living. It's a pathetic situation, plain and simple."
Full article here.

MS will buy Yahoo, then bankrupt both.