The search deal between Microsoft Corp. (NASDAQ:MSFT) and Yahoo! Inc. (NASDAQ:YHOO) has been a long time coming. But now that it's here, shareholders' reaction to the deal (announced before market) has been both negative and swift. Yahoo!'s stock's tumbled 7% right out of the gate and kept going into the early afternoon.Shares of Yahoo! were down over 11% around 1 pm EDT on Wednesday, while Microsoft edged up only 3%.
Yahoo!'s stock had advanced roughly 20% over the past three weeks on speculation that the deal would bring in "boatloads of cash," the bar set in months past by the Internet company's CEO Carol Bartz. So they were unpleasantly surprised by the deal's lack of an up-front payment.
Investors on Yahoo!'s own message boards heatedly debated the deal. Some were outraged at both management and the terms of the agreement.
artvicon wrote: "Bartz should resign. [It's] hard to imagine that [she] could make shareholders want to bring back Jerry Yang back. So much for the influence of Icahn. No cash - why even bother? Time to go Ms. Bartz."
While flowors800 chimed in with "Shareholder value is down $2.3 billion on Carol's deal to save $200 million in expenses. MSFT basically guaranteed Carol's pay package and killed the shareholders. Thanks Steve Ballmer."
The deal does have its defenders though. travispeabody comments:
"ahoo gets 88% of the new revenue and some other cash paid in on a yearly basis. It keeps all of its existing business and will quadruple its base in a year or so. No one really knows how much additional revenue this deal will create for Yahoo. In a dynamic partnership with MSFT, they could easily trash GOOG. As far as the 'upfront' payment was concerned, it basically gave MSFT a big chunk of Yahoos base revenue AND ALL THE NEW REVENUE. That's why YHOO didn't like it. They wanted their business to grow, and grow real fast. It will.
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