Revisiting Yahoo's blown $44.6 billion sale to Microsoft

Management shakeup that put Carol Bartz in power was too little too late for a company that had rejected a generous Microsoft bid.

Yahoo CEO Carol Bartz was brought on board on the heels of a rough year at Yahoo in which the company rejected a generous buyout offer from Microsoft.
Yahoo CEO Carol Bartz was brought on board on the heels of a rough year at Yahoo in which the company rejected a generous buyout offer from Microsoft. CNET

By the time Carol Bartz arrived at Yahoo two-and-a-half years ago, the struggling company had rejected the biggest lifeline it was likely to ever see.

On February 1, 2008, Microsoft offered $44.6 billion cash-and-stock to buy Yahoo. Even at the time, the deal was considered a good one for Yahoo, valuing the stock at $31 a share and representing a 62 percent premium over the closing price the day before. Today the stock is trading at just under $13.

Microsoft wasn't altruistic; the company realized it had a better chance of competing against Google if it joined forces with the other runner-up. "Today, the market is increasingly dominated by one player, who is consolidating its dominance through acquisition," Microsoft said at the time. "Together, Microsoft and Yahoo can offer a credible alternative."

Yahoo's future

What should Yahoo do now?

However, that alternative was not to be. Microsoft raised its offer to $33 a share, but Yahoo was holding out for $37 a share and the offer was withdrawn. Yahoo's intransigence angered shareholders and led to protracted battles between billionaire shareholder activist Carl Icahn and the Yahoo board of directors.

Eventually, Microsoft and Yahoo reached a deal in 2009 in which Microsoft would provide search services to Yahoo's network of sites in exchange for some search ad revenue--an ignominious end to Yahoo's once-leading search services.

In the meantime, Yahoo has failed to really ride the social-networking wave to any serious heights, despite the purchase of early photo-sharing site Flickr, and has mixed success becoming a media powerhouse with popularity in e-mail and chat services, but falling behind Google and Facebook in overall Web site traffic in the U.S.

And today, Bartz leaves Yahoo after being fired by the board.

Bartz simply wasn't able to turn the company around. But that might have been a foregone conclusion. The management shakeup that brought her into office and her efforts since have been too little too late.

 

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