[bp001]

Average share price over the last year is meaningless. Yes, the economy in general was taking a beating, but Yahoo had also come out with disappointing earning and outlook. At any given time, the market does a pretty good job at pricing in all factors to a stock's price.

If the economy as a whole is having problems and a company is at risk of lower earnings, the stock is clearly worth less. Over the longer term, if a company is able to get over those hurdles and achieve the earnings they desire, their value will again rise.

Would you argue that if a company tried to buy Citibank at $40/share that they were trying to take advantage of things? Its current price is $26/share but it was above $45 for the majority of the year. Citi, similar to Yahoo has had significant difficulties that reflect on the potential future earnings of the company. Therefore, these companies are likely fairly valued.

As a result, the Yahoo line that they are "massively undervalued" rings false to me. They have turned down a tremendous premium over their value...Unless they have other courses of action to raise their earnings significantly or they have other offers. My best guess is they are just negotiating and trying to get Microsoft to offer a few more $/share.

[dkokelley]

It's just the business cycle. The economy at whole is having problems and the company is at risk of lower earnings, as you said. This is temporary. The economy will recover, and Yahoo is probably expecting their stock to rise again to closer to their average. Yahoo is probably telling Microsoft that the premium they are offering does not reflect their true value, but an artificially low value instead. Come back later when our stock rebounds with the rest of the economy.

I'm saying that Yahoo is currently down right now, and understandably so, but that it is set to rise with the rest of the economy and Yahoo wants Microsoft to reflect that in their offer.

I believe that there is validity in the claim "massively undervalued" though the term "massively" is subject to different interpretations.