Strategy
Yahoo, Microsoft & Icahn – Internet, Money and Risk
26/06/2008
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In the last months the Internet has been distracted by something that was happening and that would have changed something of the Internet that we know today… that was the acquisition of Yahoo (YHOO) by Microsoft (MSFT), that happened with the purpose to better compete with Google (GOOG). Lots has been written and there have been a lot of people that started to judge how the process was happening and criticize the decisions of Steve Ballmer and Jerry Yang. Then later Carl Icahn entered in the scenario trying to help Microsoft to acquire Yahoo by buying an amount of shares that would make him able to fire Yang and say yes to the deal.

I have to make a disclaimer by saying that I’m not an economist (I have an humanistic degree 🙂 ) but I made some research and I started to understand a little this environment and what happened and I made some thoughts that I will explain in this post.

Yahoo! on January 31 2008 had a price per share of $19.18 and February 1 2008 Microsoft made an offer of $31 per share (something that in my opinion you can’t say no) offer that has been refused by Yahoo! maybe in a try to get more money by the deal or maybe because they didn’t want to sell, and the same day the news creates a motion in the stock market that make the price per share of Yahoo rise to $28.38… that is an increase of 47% (if my math is right) of the price (see chart below for a visual reference – provided by Wall Street Journal).

Anyway also if the reached really an historical increase the price per share was lower than the price that Microsoft offered… anyway as everyone knows during the next months happened some changes of price and lot of decisions were made and lot of press was written with the only result that nothing happened and Microsoft left the battlefield. Then as cited before Carl Icahn understands the possibility of a great economic profit and decides to try to jumps in this battlefield in a way to make the deal come true… he buys shares (50 millions if I have understood well) at the approximate price of $26.56 (the price of May 13 2008, the day the news came out) per share with the purpose to enter in the Board of the Directors and sell the Company to Microsoft for the same price of the previous offer… that would have been a gain of $4.44 per share… what happened is that Microsoft didn’t made an another offer till now… and yesterday (June 25 2008) the price per share of Yahoo was $22.01, that means that Icahn lost approximately $4.55 per share… and in my opinion I think that the price is going to drop till the price before the Microsoft proposal.

As said before I’m not an economist and I don’t know a lot about shares and the financial world, but I can make some considerations… Icahn was really brave… ad I admire him… he took the risk to do something unique, the deal didn’t happened but could happened in the future knowing how the Internet market is… Yahoo! with their brain power can find a great idea that would make them become the first search engine… there is only the need to find the idea and develop it… Microsoft needed some powerful partner to compete with Google in the search engine environment, but the deal didn’t happened… lots of things didn’t happened but that thought us that Internet is important and moves a lot of money… and in a communication aspect we can see that a news can change the sorts of a deal and change the markets…

Communication in the financial environment is important, who arrives before has the possibility to gain a lot and few lines from an important source can change markets… and Internet is changing finance by changing the flow of information, information that has to be shared faster and safer… is that an example of Web 2.0 Economy?

About author

Edoardo Piccolotto

Dad, husband, MBA graduate, I work as a Web Marketer on an Ecommerce Company, where I implement strategic decisions by using data and lean-organization methodologies.

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