Commentary

Just An Online Minute... Yahoo Makes Case For Bigger Takeover Bid

Yahoo today publicly laid out its argument for why Microsoft's $44.6 billion takeover bid is too low.

Yahoo says it expects revenue to balloon to $8.8 billion by 2010 -- 24% higher than Wall Street estimates of $7.1 billion. The company first presented some of its projections to the board of directors last December, and filed a report with the SEC today.

"Yahoo! is positioned for accelerated financial growth -- we have a powerful consumer brand, a huge global audience and a highly profitable operating model," co-founder and CEO Jerry Yang said in a statement.

Yahoo pins its bullish forecast on marketers' demands for display inventory on its own pages. "With industry-leading tools, technology, people and platforms, Yahoo! is poised to capture growth in display advertising where we believe growth will be greatest," Yang stated.

"Display is a larger opportunity than search and we are positioned to extend our leadership in display," the company stated in its SEC filing. Yahoo is especially optimistic that its recent acquisition of ad network Right Media will help bring in the ad dollars.

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The company also addresses head-on why it deems Microsoft's bid insufficient. "Yahoo provides meaningful strategic value and warrants a significant acquisition premium above its equity value in a potential change of control transaction."

Yahoo further says its acquisition would move "Microsoft from sub-scale position to strong positions in search and display." Yahoo also argues a Microsoft tie-up would give the company a stronger stake in Asia, where Yahoo has partnerships.

Still, despite Yahoo's stance that $31 a share is too low, the report doesn't argue against a merger in principle. If anything, when combined with reports that Yahoo and Microsoft are in negotiations, it seems to signal that Yahoo's leadership realizes its acquisition is likely inevitable.

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