Yahoo makes pitch to investors
Yahoo Inc.’s top executives Tuesday began a weeklong campaign to convince major shareholders that the Web powerhouse is worth more than the $42 billion Microsoft Corp. is offering in a takeover bid.
Co-founder and Chief Executive Jerry Yang, along with Yahoo’s president and chief financial officer, are meeting with their largest shareholders in several cities, arguing that Yahoo can double its cash flow from operations in the next three years. Yahoo also said it would meet earlier financial projections for the current quarter, sending its shares up 7%, or $1.81, to close Tuesday at $27.66.
The longer-term forecast is designed to shore up shareholder support for the company’s board, which last month rejected Microsoft’s cash and stock bid as inadequate. Analysts said the bid was now worth about $29 a share, down from $31 when it was made, because Microsoft’s stock price has declined.
Microsoft executives came to Yahoo’s Sunnnyvale, Calif., headquarters last week to make a case for joining forces against Internet search behemoth Google Inc., but the discussion never reached the matter of what price Yahoo would consider fair, a person familiar with the matter said.
“There’s no state of play,” said the person, who asked not to be named because any negotiations would be confidential. “Microsoft is free to make another offer if they like.”
Yahoo’s pitch to investors doesn’t convey a passion to remain independent at all costs. And at least the prepared materials, which were filed with regulators Tuesday, say nothing about hoped-for rival bids that have so far failed to materialize.
Instead, Yahoo hopes stockholders agree that Microsoft should pay more because Yahoo could do well on its own.
“The only thing they can play is, ‘We’re worth more,’ and then the ball goes back in Microsoft’s court to see if they pony up,” said analyst Ned May of Outsell Inc., a market researcher serving Web publishers.
Short of a higher offer, Yahoo wants investors to reject a slate of directors that Microsoft could nominate to the Yahoo board in the next three months.
Microsoft, which has held its own meetings with Yahoo shareholders, declined to comment. It has shown no signs of sweetening its bid, which it has called “full and fair.”
The presentation by Yahoo executives expands on a three-year strategic plan presented to the board in December, before Microsoft disclosed its offer.
It says that Yahoo has a greater opportunity in display advertising, where it is already No. 1, than in search advertising, where Google dominates. But it also assumes that Yahoo won’t continue losing search share.
By improving ad services and expanding in cellphone programs and other new areas, the executives said revenue could grow from an estimated $5.7 billion in 2008 to $8.8 billion in 2010, well above Wall Street forecasts.
Some investors and analysts who reviewed the presentation remained skeptical.
“This is a company that has had a lot of problems in recent history meeting forecasts that are three months out,” said analyst Anthony Valencia of Trust Co. of the West, which owns Yahoo stock. “For them to suddenly come up with forecasts for 2009 and 2010 -- I think Wall Street kind of yawns.”
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