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Microsoft in Perfect Position to Undercut Previous Yahoo Offer

Posted on May 16, 2008

Let me speculate. Microsoft's (MSFT) failure to acquire Yahoo (YHOO) put it in the perfect position to come back at a much lower price.Ona cash flow basis, assuming MSN were profitable equal to the rest ofMicrosoft's properties (i.e. Office and Windows), it would bevalued at roughly $10B to $15B for owning 10% of the search market.That would make Yahoo worth $15B-$22.5B for owning almost 15% of search.Adding a premium that makes sense, lets say it's worth $30B. By my math,at 1.4B shares, that's a ripe offer of $21.42/share, or a rich 38multiple for a business with relatively meager 10-20% gro...

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msn , yahoo