How Much is Microsoft Changing Its Mind? For Yahoo It’s $1.7 Billion Up

I think Microsoft acquisition of Yahoo is one of the longest stories of the year that some people think is already boring enough to continue discussing. But Steve Ballmer definitely does not think it is really that boring already as he continues offering his unexpected ideas on relations of the corporation he heads with Yahoo – causing the most unexpected consequences.

I am talking about yesterday’s amazing behavior of Yahoo stock on NASDAQ. I was checking Google Finance when I noticed Yahoo stock soaring by amazing 8% in a matter of minutes and knew immediately that something very interesting was going on – and though I had no idea what exactly it was, the guess with Yahoo is always either Microsoft or Google.

I checked the discussion page on the Yahoo page on Google Finance and my suspicions proved to have other supporters as well with people mentioning unconfirmed rumors of a new acquisition offer of the company by Microsoft. I published a quick post about my findings here and rushed to see if there was any reason for this strange behavior.

A few minutes later I discovered the reason appeared on MarketWatch: Steve Ballmer speaking at the Gartner ITXpo event said that he thought that Yahoo deal still made sense economically for shareholders of both companies. Somehow this information reached traders faster than it was published on MarketWatch or anywhere else as I witnessed the stock price rocketing well before the news reached MarketWatch or any other publication at that. And of course people started buying YHOO immediately – and in large volumes. Obviously, before it was too late and everything was bought by Microsoft.

But the enthusiasm did not last all that long as mere hours after Ballmer’s words at the conference Microsoft issued an official statement saying “Our position hasn’t changed. Microsoft has no interest in acquiring Yahoo!; there are no discussions between the companies.”

But what exactly did Steve Ballmer say to drive Yahoo’s stock all the way upwards? (quoting by Reuters):

We are not in any discussions with them. We’ll see. They want to remain independent. There are probably still opportunities around search. I think it would still make sense economically for their shareholders and ours.

So Microsoft CEO actually expressed interest in one particular part of Yahoo business – the one that is most appealing to both Microsoft and Google. But is it possible that there is some additional implication to this statement? Chances are that yes, it could be very possible as Steve Ballmer also mentioned:

We offered 33 bucks not too long ago and it’s 11 and a half. So I don’t know what price might have got the job done. It’s clear that Yahoo did not want to sell the company. It did not want to sell when we offered 33 … They probably think it’s worth at least 33 today.

So of course anyone can suggest that there are additional reasons for the comments – and these reasons may very well be about actually preparing an offer to acquire Yahoo. But it is quite clear that Ballmer has already showed Yahoo his power over the company’s stock as Yahoo’s valuation reached $18 billion when the market closed yesterday (growth by $1.7 billion compared to previous day’s closing price).

The most fascinating thing to watch, obviously, was the discussion section for Yahoo on Google Finance with comments ranging from “MSFT and Ballmer is playing with YHOO just like a monkey. Every time when GOOG reports quarterly earning, MSFT says it will merge with YHOO and then throw it away” to “what is this guy smoking? I want some” (with the latter seeming to be one of the most reasonable comments I saw yesterday from traders).

Of course such things are not just told casually during public events – Ballmer must realize the consequences perfectly well and he must have known both how the markets would react and how Yahoo shareholders would feel after yet another reminder of the declined $33 per share acquisition offer. It will be interesting to continue watching this hi-tech soap opera now that the rumors are here again. But it is very depressing watching the valuations fluctuate like this because of a few words that don’t even mention any real acquisition intention.