Microsoft-Yahoo talks: Now versus last time around

Getty Images; Noah Berger | Bloomberg | Getty Images

It's deja vu, sort of.With Microsoft reportedly in the mix for a potential acquisition of Yahoo, it's worth looking back on similar discussions that were taking place eight years ago at this time.On Feb. 1, 2008, in what would still be by far the software maker's largest ever acquisition, Microsoft offered close to $45 billion for Yahoo. Both companies were getting trounced by Google in search and online ads. Combining the two, so Microsoft thought, would create a credible challenger.

Despite representing a 62 percent premium over its market value at the time, Yahoo rejected the offer. Co-founder and then CEO Jerry Yang said the bid "substantially undervalues Yahoo."

Three months, another $5 billion and another rejection later, Microsoft withdrew its bid, deciding against taking a hostile offer to Yahoo's shareholders.

Today, Yahoo is valued at $33.4 billion, or roughly $16 billion less than what Microsoft was willing to pay in 2008. The , by contrast, has gained 45 percent since Microsoft pulled its bid on May 3 of that year.

"They should've taken the offer — the board just didn't do what they should've done," said Martin Pyykkonen, an analyst at Rosenblatt Securities who has a "sell" rating on the stock. Pyykkonen was covering Yahoo at the time and recalls the deal as being "such a no-brainer."

S&P 500 > Yahoo

Re/code reported on Thursday that Microsoft is considering participating in an acquisition of Yahoo's core business, citing sources familiar with the matter. The story says those assets are deemed worth $6 billion to $8 billion, though Yahoo's board wants $10 billion.

Most of Yahoo's current value, of course, is wrapped up in its Alibaba stake, which it purchased in 2005 for $1 billion and is now worth close to $24 billion. Back in 2008, Alibaba "really hadn't flourished," Pyykkonen said, meaning Yahoo's core advertising assets were still seen as valuable.

One thing to remember when looking at Yahoo shares now versus then: Ignore the actual stock price. Monday's price of $35.20 is actually worth much less than the $33 a share Microsoft was willing to pay then, thanks to the magic of stock buybacks.

The company's aggressive repurchase plan means that Yahoo now has 946.8 million shares outstanding, down from 1.34 billion eight years ago. Yahoo said in its latest earnings call that during the new management's tenure, the company has bought back more than $9 billion worth of shares and "reduced diluted share count by over 20 percent."