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Microsoft Looking To Take On Debt Over Yahoo

Microsoft’s offer to buy Yahoo isn’t cheap. In fact, the $44 billion offer is more money than Microsoft actually has, so the company is figuring out how to pay for it. The offer, as it stands, is for half cash, half stock, so Microsoft needs $22.3 billion in stock, and $22.3 billion in cash.

The stock is based on Microsoft’s closing price on January 31 of $32.60, so we are talking 684,049,080 shares, or just over 2/3 of a billion shares of Microsoft stock. If I understand how to read a stock summary (and I don’t, so correct me if necessary), Microsoft holds 1.3 billion of its own shares, so giving Yahoo almost half of those would still leave the company with plenty for its own purposes.

As for the cash, Microsoft has $21.076 billion on hand, but CFO Chris Liddel says it “could” use all of its money to cover most of the $22.3, which pretty much means it won’t. I’d expect Microsoft to spend half its cash, or 10.538 billion, leaving another $11.762 billion to cover the rest. Liddell says the company will borrow money, the first time it has done that.

Luckily, Microsoft’s a pretty healthy company. The company pulled in $5.8 billion in cash in just its last quarter, so give it a year, Microsoft could pay off that debt and still have plenty of spending money. Yahoo is profitable too, and hopefully, under Microsoft, even more profitable, so Yahoo is definitely something Microsoft can afford.

That question out of the way, we just have to wonder if Microsoft can make this work, turn Yahoo+Windows Live into the Google killer it keeps hoping for.

February 4th, 2008 Posted by Nathan Weinberg | Yahoo Acquisition, Corporate, Yahoo | one comment



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1 Comment »

  1. $44 billion offer : I thought Bill Gates had this in his back pocket.. Sorry I couldn’t resist this Joke :)

    This is going to have a major impact on the Interent and software development.

    Look at Google Docs and Spreadsheets ( https://www.google.com/accounts/ServiceLogin?service=writely&passive=true&continue=http%3A%2F%2Fdocs.google.com%2F&followup=http%3A%2F%2Fdocs.google.com%2F&ltmpl=homepage&nui=1&rm=false )

    This will be happening once MS and Yahoo start talking to each other.

    Comment by Bill Gates | February 7, 2008

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