Friday, February 01, 2008

We Can Thank Buffett for the Microsoft/Yahoo Deal

Shares of Yahoo soared following today's announcement that Microsoft made a bid for the company. Microsoft is offering $31 per share for Yahoo, which represents a 62% premium over Yahoo's previous closing price.

Microsoft is obviously hoping a Yahoo acquisition will allow it to compete more effectively against Google. Analysts are already debating whether or not the deal makes sense. However, other than the timing, there is really nothing surprising about the deal. As I pointed out last June (Speculating on a Microsoft and Yahoo! Deal) Susan Decker's promotion to president of Yahoo made a deal between Microsoft and Yahoo all the more likely. This is because Decker had also been recently appointed to Berkshire Hathaway's board of directors. Not coincidentally, Bill Gates, Microsoft's founder, also sits on the Berkshire board.

When all is said and done, Yahoo sharesholders should thank Warren Buffett for today's offer from Microsoft. After all, Buffett was instrumental in bringing together the major players in this deal.