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Yahoo Running Out of Time with Microsoft

Yahoos Q1 2008 reports are due out on the 22nd (next Tuesday), and analysts dont expect much from them. Thomson Financial says that the Wall Street consensus is $1.33B in revenue, or 9 net income per share. (Compare this to their Q4 2007 numbers of $1.8B in revenue and 19 net income per share.) A disappointing Q1 could be a sign that Yahoo was distracted by Microsofts offer, as Derek Brown of Cantor Fitzgerald told CNET, but it could also be a sign of the companys failing confidence.

Additional pressure comes from Microsofts three-week deadline imposed in a letter written on April 5. Yahoos initial response was to blame their hesitance on the fact that the deal will face FCC scrutiny (need we remind you that Google/DoubleClick spent 8 months before the FCC?). Analysts talking to CNET put the likelihood of FCC opposition, however, at 15-25%. With the deadline looming for next Saturday (four days after their Q1 reports are due), Yahoo is sure to have a lot on its mind.

Potentially most devastating of all, a poor Q1 could lead to a lower offer from Microsoft. In fact, Reuters cites unnamed sources that say that Microsofts bid will turn hostile"and lower"after the ultimatum deadline next Saturday, with the offer dropping from $44.6B to $42.4B.

Yahoos board convened Friday, but didnt come to any decisions on mergers with Microsoft, AOL, News Corp or anyone else. Things are quickly growing dimmer for Yahoo. What path do you think they should (or will) take?

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