Microsoft to Borrow Money for Yahoo Deal

Feb 6, 2008 • 10:00 am | comments (3) by twitter | Filed Under Bing Search
 

If the Microsoft bid for Yahoo goes through, Reuters says that they might have to borrow money to make it happen.

"It's likely we're actually going to borrow for the first time," said [Microsoft CFO Chris] Liddell in an annual strategy meeting with analysts. "It's going to be a mixture of the cash we have on hand plus debt."

Is that the end for Microsoft? Some people think that borrowing the money is a really bad idea.

Does anyone else think that they are underestimating the cost of integrating Yahoos services into their portfolio? If they are borrowing money for the purchase, how are they going to finance rewriting all the software?

Others, however, are more optimistic:

They have 19B in cash reserves, and just a year ago they had over 40B in cash reserves. They make about $17 billion in profit a year, so I don't see any major issues here. In the worst case, they can issue bonds or choose other alternatives.

Brett Tabke feels that this might just be too high of an asking price.

Personally, I have strongly mixed emotions on the deal. I hate to see competition decreased in the search space, but I agree that the Microsoft offer is a natural and evolutionary thing for them to do. They need to do it.

However, the offer price seems insanely high to me. Especially if daddy warbucks has to go with hands out to banks to make the deal work. Lets be honest, Yahoo's market share in search is going to continue to erode. They have thrown up little in the last year that will stop or even slow down the Google steam roller. How can Microsoft make $44b possibly work? That seems soo high - too high for a falling giant.

Many agree on that point.

It'll be interesting to see how this plays out. It will be more interesting to see its impact on others in the search space.

Forum discussion continues at WebmasterWorld.

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Comments:

Favorite Browser

02/06/2008 05:29 pm

This deal reminds me Yahoo GeoCities purchase (their big mistake).

Jacques SEO

02/07/2008 01:27 pm

$44 billion can go a long way towards torpedoing the great Microsoft. Bad business decisions like this, coupled to the furiously evolving free linux operating system, courtesy of ubuntu, inter alia, could see them taking some serious damage. The global trend is towards freeware, and a lot of pc manufacturers are going to offer the free linux system, with all its other positives. So stretching themselves to such an extent is very risky, unless they know something we don't.

Goran

02/07/2008 08:55 pm

I agree with Jacques. They need to prepare for times ahead. The company I work for spends less then 10% of what they use to as open source becomes more readily available. Soon we will spend nothing.

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