Bloggers are supposed to offer opinions, but when it comes to Microsoft buying Yahoo, the opinion of the stock market is much more interesting than anything I might say.
An article in the Wall Street Journal today (Chicken Little Investors? by Robert Cyran, Rob Cox and Dwight Cass of breakingviews.com) points out that since the proposed deal was announced, Microsoft's stock price has fallen 12%. In terms of market value, that translates to $41 billion. This over a deal valued at $44.6 billion.
What's scaring off investors? The article suggests:
- Microsoft has overpaid for deals in the past
- This would be the biggest takeover ever for Microsoft
- Academic studies suggest mergers tend to destroy more value than they create
- Steve Ballmer already looks stretched managing the company
- Microsoft has struggled to crack the online-advertising market
Despite all this, the authors think the large drop in the stock price is an over-reaction.
Time will tell.