Yahoo bullish on its future; expects higher Microsoft offer
19 Mar 2008
Yahoo's management may have reconciled itself to being taken over by Microsoft, but is unwilling to sell itself cheap. In what many consider as a move to bargain a higher takeover price than the $42 billion offered by Microsoft, Yahoo said on Tuesday it is on track to meet its 2008 earnings forecast and also forecast a bright two years ahead.
Yahoo had already rejected Microsoft's offer as being severely undervaluing its assets and future growth prospects (See:Yahoo plans alternatives as board weighs Microsoft offer). In an investor presentation filed with the US Securities and Exchange Commission, Yahoo said that it ''provides meaningful strategic value and warrants a significant acquisition premium above its equity value''.
As for the future, Yahoo paints a very rosy picture. It believes it can nearly double operating cash flow to $3.7 billion in 2010. It forecast a rise in revenue, excluding payments to affiliates, to $8.8 billion from an estimated $5.7 billion this year.
Stressing on a bright future, Yahoo co-founder Jerry Yang who was brought back as CEO as a fire-fighting measure recently, said, ''Yahoo is positioned for accelerated financial growth -- we have a powerful consumer brand, a huge global audience and a highly profitable operating model''.
Responding to criticism that such over-optimistic predictions were merely a ruse to collect a higher takeover value, Yahoo said that the ambitious three-year view had been presented before board on December 2007, well before Microsoft made its offer public on 1 February 2008.
Yahoo expects to grow especially in the areas of internet display and video advertising, with estimates of $1.9 billion in added revenue over the next three years. It also expects to enhance its presence in the search market, adding a possible $1.4 billion over three years.
These being areas where Microsoft has traditionally lagged behind its rival Google, Yahoo expects a premium valuation on the grounds that its assets and services would provide an immediate shot in the arm for Microsoft.
