Investors see Microsoft bid for Yahoo as generous

By Muralikumar Anantharaman

BOSTON (Reuters) - Microsoft Corp's $44.6 billion unsolicited bid for Yahoo Inc is generous and offers shareholders of the Internet media firm an escape route from years of sub-par stock market performance, investors said on Friday.

Microsoft, the world's biggest software maker, sent a letter to Yahoo's board on Thursday night to offer $31 per share in cash and stock, a 62 percent premium over Yahoo's closing stock price that day.

"It has been fairly proven out in the market that Yahoo is struggling as a standalone company," said Mike Binger, a fund manager at Thrivent Financial in Minneapolis, who owns both Yahoo and Microsoft shares in client portfolios.

"It would be very hard for Yahoo as a standalone entity to grow their stock to $31 in the next couple of years. From a shareholder perspective, I think it's a very fair price for the state of Yahoo's business fundamentals right now," he said.

Yahoo said its board would evaluate the offer. The company in the past few years has lost market share to powerful leader Google Inc in the lucrative Web search market, and saw management turnover in 2007.

Its shares have traded mostly below the $30 level in the past two years and dropped below $20 in January, a far cry from $125 in early 2000, at the height of the tech bubble. Google, by comparison, is up five-fold since listing in 2004.

"I would be so thankful. Someone finally put me out of my misery," Gabe Birdsall, a portfolio manager at AIM Investments, said of his likely reaction to the bid if he had stayed a Yahoo shareholder.

Frustrated by a lack of progress in its business goals and the lackluster stock performance, Birdsall's AIM Constellation Fund sold its Yahoo holdings more than a year ago, he said. The fund does own Microsoft shares.