Microsoft reports declining sales; sticks to original Yahoo offer

25 April 2008

Now Microsoft CFO Chris Liddell joins issue with CEO Steve Ballmer in ruling out a higher bid for Yahoo, even as he stressed on the importance of rapidity in decision-making.

"Speed is of the essence for the deal to make sense,'' he said, and added that if no deal is reached by this weekend, Microsoft will reconsider its offer and reveal new plans next week. "Unfortunately, the transaction has been anything but speedy and has been characterised by what would appear to be unrealistic expectations of value," he said of Yahoo's moves to frustrate Microsoft's unsolicited merger proposition.

He was speaking on a conference call that primarily focused on Microsoft's quarterly results. The world's largest software maker reported a 24 per cent drop in sales of Windows last quarter and forecast earnings that may miss analysts' estimates. Third-quarter net income fell 11 per cent to $4.39 billion, or 47 cents a share, while revenue remained almost unchanged at $14.5 billion.

Yahoo had already rejected Microsoft's bid of 30th January that had originally valued Yahoo at $44.6 billion, but has since decreased in value following a decline in Microsoft's share price.

The reason cited by the Yahoo board for declining the original offer of $31 a share was that it, in their words, grossly undervalued the company's assets and growth potential. It  used the recent encouraging quarterly results to buttress its argument, but Microsoft is unwilling to buy the story.

Microsoft believes it has offered a fair value for Yahoo and find in the latter's inability to find a counter-offer enough justification for its stance. Even the better-than-expected quarterly results have failed to shake Microsoft's resolve, as aptly demonstrated by Ballmer's comments earlier this week. (See: Microsoft's Ballmer unimpressed by Yahoo results; won't raise price, can live without deal)