With Yahoo!'s (NASDAQ:YHOO) shares smooching five-year lows, at least one investor wants Microsoft (NASDAQ:MSFT) back.
Mithras Capital partner Mark Nelson is calling out to both companies, hoping to play Cupid at a $22 price point. At that price, Nelson argues, Microsoft can essentially buy Yahoo!'s search business for $10.3 billion, after cashing out of Yahoo!'s Asian stakes and non-search businesses (and extracting $3 billion in cost savings and $2.8 billion in tax benefits).
It's a fair argument, but why should Microsoft pay that much? When it offered $31 a share for Yahoo! back in January, Yahoo!'s Asian assets were worth roughly $10 a share, Yahoo! was more relevant in search than it is today, and the market hadn't crashed.
Google (NASDAQ:GOOG) closed at $564.30 the day that Microsoft found itself on bended knee for Yahoo!. Google trades 43% lower than that today, and it's been gaining market share at Yahoo!'s expense. Is Microsoft stupid enough to simply mark down its original offer by just 29%, when Yahoo! investors would probably gladly hand the company over in the mid-teens?
And are we so sure that Microsoft would want to bail on Yahoo!'s stakes in China's Alibaba, Yahoo! Japan, and South Korea's Gmarket (NASDAQ:GMKT)? If Microsoft is serious about taking on Google, it's going to have to do so with its passport clenched in its fist.
I do think a deal with Microsoft is possible. It certainly makes more sense than its subtraction by multiplication potential pairing with Time Warner's (NYSE:TWX) AOL. However, the terms of a deal won't be called out from the Yahoo! camp, and any premium will have to be realistic.
Yahoo! blew its shot at a sweet exit strategy. Now it can only hope for a bittersweet way out.
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