SUNNYVALE, Calif. — Yahoo remained silent as it let pass Microsoft’s deadline for a response to its $40 billion-plus offer for the Internet company Saturday, putting the ball back in Microsoft’s court.
Most analysts expect Microsoft to take its offer to shareholders at Yahoo’s annual meeting by proposing its own slate of directors for Yahoo’s board and letting stock owners decide whether they want to accept Microsoft’s offer.
But there are other possibilities: Microsoft could withdraw its offer, at least for the time being, or extend the deadline hoping to hammer out a deal. And Yahoo could announce it has a deal with another partner.
The passing of the deadline prolongs a standoff that began Feb. 1 with Microsoft’s offer of $44.6 billion, $31 a share, and Yahoo insisting it was worth far more. But the value of the half-cash, half-stock deal has actually fallen since it was first announced, as shares of both companies have declined. Yahoo shares closed Friday at $26.80; Microsoft’s at $29.83, down from $30.50 the day the deal was announced.
Yahoo has been scrambling to find alternatives, after postponing its annual meeting to weigh its options.
It has until mid-July to hold its annual meeting under the law in Delaware, where the company is incorporated.
Industry observers expect a deal to be struck, possibly for as much as $34 a share, but it’s possible that the issue won’t be resolved until the summer and Yahoo’s annual meeting.
Bernstein Research analyst Jeffrey Lindsay predicted in a note Friday that the acquisition would be over before the end of July at a “slightly improved price.”
“It will be a good, old-fashioned proxy fight,” Lindsay said, using the term for a battle to control a corporate board. “At any time up to then, Yahoo can throw in the towel and negotiate.”
Each company has been showing signs of age as the newer, nimbler Google dominates the lucrative business for Internet search advertising and begins to move into the area where Yahoo is strong: Internet display ads.
After years in denial, insiders say, Microsoft realized it had to catch up before Google became the next Microsoft — so entrenched that no competitor could dislodge it.
The Internet advertising market “is increasingly dominated by one player,” Microsoft chief executive Steve Ballmer observed when he announced the offer for Yahoo on Feb. 1.
