Thursday, January 18, 2007

Buying Yahoo

Would anyone buy Yahoo? There are a lot of good reasons to do so:
  • Great brand
  • Huge traffic
  • A fat pipeline of products
  • Overhauling technology - expected to close the gap with Google
  • Overhauling company structure - expected to produce a quicker, leaner, meaner company
  • Shares low now compared to their all time highs
An Associated Press article on Forbes caught my attention and discussed this very idea.

William Blair analyst Troy Mastin reckons Yahoo is a good target for the cash rich buyout firms (and buyout firms, in the States, are cash rich right now).

There's a catch. Although Yahoo is a good target it is an unlikely target due to its size. Yahoo has a market cap of nearly $40 billion so if you add a mere 20% premium to that then you'd need $48 billion to buy the internet giant. That would be a record breaking buy out.

Mastin also worries that any departure which resulted in the stock incentive to staff being rescinded would trigger a staff exodus. Eh? That's happened already.

I like to float the idea of Microsoft buying Yahoo. It does put a theoretical challenger to Google up for an interesting twist. The truth is that that's very unlikely.

Remember how Yahoo looked when it was young? $48 billion for ...