Microsoft (NSDQ: MSFT) is serious about not wanting to raise its bid for Yahoo (NSDQ: YHOO). Said CFO Chris Liddell on a possible raised bid: "The strongest argument, simply that we can afford to, is not one that I favor." Rather than seeing Yahoo worth more than $31 per share, Liddell suggested that it's probably worth less, noting that it continues to lose market share in search. "The results that they released Tuesday were in line with their previous guidance (when Yahoo was at $19 per share)."
And the clock is ticking: With a deadline of this Saturday for Yahoo to come running into Ballmer's arms, the company will announce where it's going next week (assuming no major movement in the next couple days). That could mean a proxy fight, or it could include walking away from its bid, which Liddell said was a real possibility: "With Yahoo or without Yahoo Microsoft is focused on the online advertising market." That focus, said Liddell, will include more organic investment, as well as, possibly, more deal making. Keep in mind that Yahoo has continued to sag since its Tuesday report. The stock fell 2.78 percent during trading today, and then another 1.06 after hours.
With today's results, the company could make the case that its online ad business is credible sans-Yahoo. Liddell pegged its online ad growth rate, ex-aQuantive, at a solid 29 percent. And he noted that the company has retained all of the key executives from aQuantive, a sign of a smooth integration. Beyond its online ad business, the games business continues to be a real standout, with results coming in solidly above expectations.
As for the economy, Microsoft falls into the 'not too worried about it yet' camp. Liddell: "Like you, we're cautious on the reported economic softness, but at this point, we're not seeing any significant spillover." The company benefits by having such a global reach, as it sees total demand for software continuing to grow, even if domestically that slows down.
By Joseph Weisenthal