[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.