Good Morning Silicon Valley

Ah, what a slippery concept value is — like beauty, it exists in the eye of the beholder, the sum of all the tangibles and intangibles, the potentials and the liabilities. But in the corporate world, value exists only as a concept until money changes hands based on a consensus. Less than two weeks ago, the consensus of the stock market, the usual vehicle for sorting these things out, was that Yahoo, showing no signs of a needed turnaround, was worth about $20 a share. Then on Feb. 1, Microsoft let it be known that, given its needs, desires and generosity of heart, it valued Yahoo at $31 a share. Now, after talking over all the assets of the company, all the sweat and tears, all the faithful but insufficiently profitable fans, all the good times, Yahoo’s board members have concluded Microsoft’s offer was insultingly low. It may be difficult to put the real value of the company into words, the board signaled, but if pressed, those words might sound something like “$40 a share.” Meanwhile, just to keep everyone off balance, Yahoo has reportedly reopened talks with AOL about a possible merger.

On a mix of hopes and fears about the deal, Yahoo’s stock is now floating around $30 a share, and the NYT’s Saul Hansell says that’s a sign that the market figures Yahoo’s move as a last-ditch effort to extract some more cash from Microsoft, and not as an absolute rejection: “If Yahoo’s board, instead, appeared committed to digging in their heels and remaining independent, Yahoo shares would drop like a rock.” So the next move is Microsoft’s, unless to the surprise of everyone, a white knight rides out of the fog. Are we in for a diplomatic resolution or will Redmond opt for trench warfare with a tender offer or a board challenge? Stay tuned.