Institutional investors reacted positively to Microsoft Corp.s bid today for Yahoo! Inc., although their enthusiasm was somewhat tempered by a drop in Microsofts share price. Microsoft has offered to acquire all of Yahoos common stock at $31 per share for a total deal price of about $44.6 billion.
Its a logical move for Microsoft to try and acquire Yahoo! I think (the deal) has been a long time coming, said Ken Allen, investment analyst who covers software stocks for T. Rowe Price & Associates. The companies said today that theyve been talking about it for a long time. He added that the acquisition could help Microsoft and Yahoo better compete against Google Inc. According to EDGAR Pro, T. Rowe Price owns 129.4 million shares of Microsoft and 18 million shares of Yahoo.
Its a very good strategic move, but its not clear that the combined firm will make money. I think thats what the market said today, said the CIO of another large institutional Microsoft shareholder who declined to be identified.
Microsoft closed at $30.45, down $2.15, while Yahoo closed at $28.38, up $9.20. Both stocks trade on Nasdaq.
In reaction to the drop in Microsofts share price, Mr. Allen said: I think investors are reacting to the uncertainty around the acquisition, but I think the drop is overdone because the acquisition makes sense. And Microsofts business has been doing very well.