Yahoo shareholders cannot be happy about the value drop in its stock after Microsoft declined to meet Yahoo's price point for takeover.NEW YORK (Reuters) - Yahoo Inc's (YHOO.O: Quote, Profile, Research) shares tumbled 22 percent in premarket trading on Monday after Microsoft Corp (MSFT.O: Quote, Profile, Research) withdrew its $47.5 billion takeover offer for the Internet search and media company.
The collapse of talks on what would have been one of the largest
deals in the technology sector prompted Wall Street brokerages to cut
their ratings and price targets on Yahoo, which rejected Microsoft's
$33-per-share bid as too low and demanded $37 per share instead.
"Yahoo's execution remains the problem, as the company has not been
able to execute better targeting and measurement on its own site
effectively enough over the past 15 years," UBS analyst Heather Bellini
wrote in a note to clients.
"We are not willing to give them the benefit of the doubt that they
can make meaningful improvement over the next three years, particularly
given a heightened competitive dynamic where Yahoo will now be
competing against Google, Microsoft, AOL, and possibly others," Bellini
said.
Yahoo is under pressure to come up with alternatives following
Microsoft's pull-out, which was announced on Saturday following the
breakdown of talks between Microsoft Chief Executive Steve Ballmer and
Yahoo CEO Jerry Yang.
Yahoo is likely to push for an advertising partnership with Web search leader Google Inc (GOOG.O: Quote, Profile, Research),
sources familiar with the matter say. A tie-up with Google, seen as a
big winner from the end of Microsoft-Yahoo talks, should help boost
Yahoo's operating performance in the near term.
Google shares rose 3.8 percent to $603.50 in premarket trading while Microsoft shares jumped 5.9 percent to $30.96.
Bernstein Research analysts said in a note to clients that
Microsoft's willingness to walk away showed financial discipline and
alleviated concerns that the software maker would overpay for Yahoo.
Yahoo shares were trading at $22.35 before the Nasdaq open, compared with Friday's close of $28.67.
(Reporting by Tiffany Wu, editing by Maureen Bavdek)
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