Microsoft Making Its Case For Yahoo

Let the campaigning begin: Microsoft hosted a conference call with the Street and media this morning to talk over its $45 billion dollar hostile bid for Yahoo, making its case not just to Microsoft and Yahoo investors, but to Yahoo employees who might feel tempted to make a bee-line for the exits.

As Yahoo fumbles around with a pat statement that the board is reviewing the offer and will do what's best for shareholders, Microsoft launches a calculated, scripted conference call featuring all the company's top brass: Steve Ballmer was joined by Kevin Johnson, Ray Ozzie, Chris Liddell, and Brad Smith, the heavyweights you'd expect on a deal of this magnitude.

My key takeaways from the call, which included an extended question and answer period with Wall Street analysts: the almost reverential words all of them had to share about Yahoo's engineering team. Says Ballmer: "We're all very excited about today's announcement." He adds that this isn't about a single acquisition, but instead "we also see this announcement as the next major milestone in Microsoft's company-wide transformation."

On the call, the analyst from Goldman Sachs was curious about where this deal goes from here. Is Microsoft prepared to go higher than $31 a share, or the 62 percent premium the company is already offering. And is Microsoft worried that others will step up for a play on Yahoo, leading to a bidding war. CFO Chris Liddell says that isn't likely, nor is the company worried. "Clearly we believe the offer is a very attractive one. We've structured it in a way to make it attractive." Brad Smith, Microsoft's general counsel, says "We've clearly made a compelling offer."

He adds that Microsoft has already heard from a number of big name media companies, the companies that would most likely want to compete for Yahoo, and the reaction, he says has been uniform: They have "encouraged us to make this kind of acquisition. The unsolicited feedback is that this is the right kind of step, more than compelling to make us a strong Number 2 in the marketplace." And what about a bid from Google? Is that possible? Says Smith: "Google has 75 percent market share. They're not in a position to do this. They're prevented by anti-trust laws from buying Yahoo, or (its Search business) from Yahoo."

There's also the question of Yahoo's other assets, particularly the company's partnership with Softbank and Yahoo Japan, and Yahoo's investment in China's Alibaba. Would Microsoft consider divesting of those assets? Ballmer says "no." He adds that "those are complex relationships and minority investments. Yahoo Japan with Softbank; similarly with Alibaba. Our basic approach is to buy all of Yahoo, understand those relationships, and the default would be to not make any changes in those relationships."

Pacific Crest's Brendan Barnicle says the conference call was long on vision, but short on details. Those were some of the nuggets that caught my eye. And for what it's worth, Piper Jaffray's Gene Munster says he's confident the deal will get done, that the bid will actually go up, and that the outstanding culture clash between Microsoft and Yahoo will mean a long period of time to make this integration a successful one.

--CNBC.com has business relationships with both Yahoo and Microsoft.

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