Microsoft to Buy Yahoo: Third Time the Charm?

One of the main reasons the futures were down early this morning was last night’s disappointing earnings report from Google (GOOG). The futures did a 180 degree turn when the news came out that Microsoft (MSFT) made an unsolicited offer to buy Google’s rival Yahoo (YHOO) for $44.6 billion.

Talk about Microsoft buying Yahoo has been circulating since early 2006. At that time, Microsoft said it was looking for a “creative partnership” rather than an acquisition. Rumors surfaced again on May 4, 2007; the ticker in Times Square proclaimed Microsoft wanted to buy Yahoo. Last night, Microsoft chairman Steve Ballmer made the offer to Yahoo following the resignation of Chairman Terry Semel.

Mercury retrograde can bring back issues in the news from the past. Acquisition deals announced for the first time during Mercury retrograde usually don’t materialize. An example was US Airways (LCC) announcement on November 15, 2006 to acquire Delta Airlines (DAL) for $8 billion while Delta was still in bankruptcy. On the flip side, proposals or deals that were talked about or unsuccessful in the past may materialize during those three weeks three times a year when Mercury is retrograde. With Mercury retrograde from January 28 – February 18 in the sign Aquarius, which relates to computers, electronics, and the internet, Microsoft’s moment may have arrived.

After reaching a 52 week high of $34.08 on October 29, Yahoo had been on a sharp decline, reaching a low of $18.58 on Wednesday. I was waiting for Yahoo to get closer to $15/share before making my first purchase, and I thought it would hit that as we got closer to mid February.

Google buying Yahoo would clearly be a better fit than Microsoft, but I doubt it would make it over the hurdle of antitrust issues. Even Time Warner (TWX) would be a better fit as there would be a good synergy between Time Warner’s magazine and AOL portals and Yahoo Finance and other channels.

Microsoft is offering Yahoo shareholders $31/share for their stock, or they can exchange it for Microsoft stock. As the song goes, Yahoo shareholders should “take the money and run.” Microsoft believes it could complete the Yahoo acquisition in the second half of 2008. Use the Yahoo proceeds to buy Microsoft stock when it’s cheaper later this year.

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