Second Quarter results may determine Yahoo fate
Microsoft has shadowed Yahoo Inc. for almost the entire second quarter and may actually surprise the staunchest of Yahoo advocates with a take-over.
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The odds have left even the most seasoned of odds makers wondering which way the game will fall. With key issues undecided as of Tuesday, the cloak and dagger, cat and mouse game activist investor Carl Icahn and Yahoo board and management have played have most of the Internet world watching.
After playing cool, coy and disinterested for months Microsoft raised its takeover bid for Yahoo in early May to $47.5 billion, or $33 per share. When Yahoo Chief Executive Jerry Yang pushed for $37 per share Microsoft abruptly withdrew its offer. Yahoo hasn’t seen the sunny side of $37 per share since January 2006.
Microsoft may have pulled its offer, but it set off another chain of events that kept Yahoo tap-dancing for the rest of the second quarter. And it was Icahn who turned up the music and the heat for the show.
Icahn, an out-of-the box, envelope pushing billionaire, snapped up a 5 percent stake in the company and then launched a campaign to oust Yahoo’s current directors in hopes of arranging a sale to Microsoft.
Shareholders hold the cards in this high stakes game because it will be up to shareholders to choose between Yahoo's incumbent board and Icahn's alternate slate on Aug. 1. The company’s Aug. 1 annual stockholder’s meeting will be held in San Jose. The CEO who walks into the meeting may not be the same one who walks out. Icahn has promised to fire Yang, 39 and bring in a more experienced and seasoned leader if stockholders choose Icahn’s proposed slate of new board members.
If that weren’t enough for Yahoo to contend with, Microsoft came back with vengeance, making multiple offers to buy Yahoo's online search operations. Yahoo’s board would have none of it and spurned Microsoft once again. But they didn’t simply retreat into the woodwork. Yahoo turned in search of other suitors and hooked up with competitor and search leader Google Inc. Yahoo is estimating a revenue increase of about $800 million by relying on Google’s superior technology to sell some of the ads running along side the search results on its web site.
It may be a too-little too late effort by Yahoo. For more than two years the company hasn’t had much to show stockholders in terms of results. That analyst say, is partly what opened the door for Microsoft’s takeover attempt. Stockholders watching the earnings closely may very well side with Microsoft – especially if Yahoo’s second-quarter earnings don’t at least match analyst’s expectations. If that happens there may very well be an exodus away from Yahoo’s current regime and towards Icahn’s promise of a better tomorrow.
The odds are looking better for Icahn. Google missed analysts' earnings target last week. Yahoo might stumble too given Google’s lack of performance.
Analysts surveyed by Thomson Financial expect Yahoo to earn 11 cents per share on revenue of $1.37 billion. That’s minus commissions paid to the company's advertising partners.
Company mangers are expected to go the extra mile in an attempt to lessen Icahn’s pressure on Yahoo, and impress shareholders. Part of that extra effort may be reflected in either a special shareholder dividend. Yahoo may also echo Icahn and Microsoft’s idea to sell some of the company’s Asian holdings – part of a plan it rejected earlier.
Not everyone is hopeful. Canaccord Adams analyst Colin Gillis is downright worried. He believes Yahoo may try to paint too pretty a picture for the third quarter in an attempt to stave off Icahn’s coup. A Yahoo seen through rose colored glasses might be nice, but Gillis wrote in a research note that brightening Yahoo’s outlook might help the board prevail over Icahn, but it could also set the company up for a sharp disappointment in the third quarter.
Yahoo intends to begin working with Google in September, pending the approval of regulators. They’re also expected to release a new Internet marketing system that will aim messages at specific demographic groups. The system, called “Amp,” will supposedly make it easier for advertisers to focus their messages to those groups.
In the meantime, Yahoo shares plunged nearly 29 percent in the quarter. The stock price is down by just 3 percent for the year so far. Yahoo shares entered the week at $22.45.
After playing cool, coy and disinterested for months Microsoft raised its takeover bid for Yahoo in early May to $47.5 billion, or $33 per share. When Yahoo Chief Executive Jerry Yang pushed for $37 per share Microsoft abruptly withdrew its offer. Yahoo hasn’t seen the sunny side of $37 per share since January 2006.
Microsoft may have pulled its offer, but it set off another chain of events that kept Yahoo tap-dancing for the rest of the second quarter. And it was Icahn who turned up the music and the heat for the show.
Icahn, an out-of-the box, envelope pushing billionaire, snapped up a 5 percent stake in the company and then launched a campaign to oust Yahoo’s current directors in hopes of arranging a sale to Microsoft.
Shareholders hold the cards in this high stakes game because it will be up to shareholders to choose between Yahoo's incumbent board and Icahn's alternate slate on Aug. 1. The company’s Aug. 1 annual stockholder’s meeting will be held in San Jose. The CEO who walks into the meeting may not be the same one who walks out. Icahn has promised to fire Yang, 39 and bring in a more experienced and seasoned leader if stockholders choose Icahn’s proposed slate of new board members.
If that weren’t enough for Yahoo to contend with, Microsoft came back with vengeance, making multiple offers to buy Yahoo's online search operations. Yahoo’s board would have none of it and spurned Microsoft once again. But they didn’t simply retreat into the woodwork. Yahoo turned in search of other suitors and hooked up with competitor and search leader Google Inc. Yahoo is estimating a revenue increase of about $800 million by relying on Google’s superior technology to sell some of the ads running along side the search results on its web site.
It may be a too-little too late effort by Yahoo. For more than two years the company hasn’t had much to show stockholders in terms of results. That analyst say, is partly what opened the door for Microsoft’s takeover attempt. Stockholders watching the earnings closely may very well side with Microsoft – especially if Yahoo’s second-quarter earnings don’t at least match analyst’s expectations. If that happens there may very well be an exodus away from Yahoo’s current regime and towards Icahn’s promise of a better tomorrow.
The odds are looking better for Icahn. Google missed analysts' earnings target last week. Yahoo might stumble too given Google’s lack of performance.
Analysts surveyed by Thomson Financial expect Yahoo to earn 11 cents per share on revenue of $1.37 billion. That’s minus commissions paid to the company's advertising partners.
Company mangers are expected to go the extra mile in an attempt to lessen Icahn’s pressure on Yahoo, and impress shareholders. Part of that extra effort may be reflected in either a special shareholder dividend. Yahoo may also echo Icahn and Microsoft’s idea to sell some of the company’s Asian holdings – part of a plan it rejected earlier.
Not everyone is hopeful. Canaccord Adams analyst Colin Gillis is downright worried. He believes Yahoo may try to paint too pretty a picture for the third quarter in an attempt to stave off Icahn’s coup. A Yahoo seen through rose colored glasses might be nice, but Gillis wrote in a research note that brightening Yahoo’s outlook might help the board prevail over Icahn, but it could also set the company up for a sharp disappointment in the third quarter.
Yahoo intends to begin working with Google in September, pending the approval of regulators. They’re also expected to release a new Internet marketing system that will aim messages at specific demographic groups. The system, called “Amp,” will supposedly make it easier for advertisers to focus their messages to those groups.
In the meantime, Yahoo shares plunged nearly 29 percent in the quarter. The stock price is down by just 3 percent for the year so far. Yahoo shares entered the week at $22.45.
