Henry Blodget revises his alternative course of action in the MSFT/YHOO saga: basically to spin off MSFT’s web assets into Yahoo! for 50% of the company.
This is what I suggested last year (and essentially what John Battelle suggested, too).
In principle, this made sense… but once YHOO got dirt cheap (< $20/share) it became vulnerable. If you are MSFT and can now own the entire thing and YHOO has less and less leverage, why settle for less?
If anyone can convince MSFT that this is the way to go, sure, why not… but Yahoo! sat on this opportunity last year and found itself in the corner.
We shall see. One last thing: I don’t really think MSFT will care too much about short term fluctuations in its stock price if it means it will have - in the mid to long term - the web’s grand prize, Yahoo! If MSFT gets too cheap, buyers will ultimately step in and drive the price back up. Which is what happened with Yahoo! - despite doomsayers who said it would go down to the low-teens.
To see just how much leverage YHOO’s got, click here.
Note: Long YHOO.
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