Microsoft Goes After Yahoo!: $44.6 Billion

From The New York Times.

Yahoooooo-oooo!

So this means Yahoo! is going to start crashing and reporting errors too?

Oh.
Thank you for that.

I think that most people "hope" this prevents Yahoo from "crashing" altogether.

Google revenue per employee ($16.6B/17,000) = $976,000 ea
MSFT revenue per employee ($58B/78,0000 = $744,000 ea
Yahoo revenue per employee ($7B/12,000) = $583,000 ea

Google net profit as percentage of revenues = 25%
MSFT net profit as percentage of revenues = 29%
Yahoo net profit as percentage of revenues = 09%

Can't buyouts be put up to a public vote with an option for "No, fuck you?"

wow, i also just realized that i've been using a yahoomail account, since like 1996.

this'll be interesting.

and possibly suck

oh

Daring Fireball Link

I've heard a lot of other pretty bad stories that don't involve death, but this rates pretty high up there for me too.

Although it's early in the morning and I'm not fully awake, looking at Yahoo's latest 10-Q and the cash flow statement, it doesn't look like they're in danger of burning. They're just not doing as well as the analysts would like. To their credit, they did make about a billion dollars worth of acquisitions this year, which they didn't make last year, which probably had an impact on their income statement revenue. It's probably not a bad thing, though.

(I've learned not to trust the analysts. If a company misses the analysts' predictions by less than even -1%, they still predict the company is tanking. Look at Google this week; they came up short of the analysts' expectations by $0.04 per share (less than 1% of revenue), or a total of about 12 million dollars, and the market reacted by dropping their shares almost 9%, or about 13 billion dollars. It's irrational.)

Anyway, ranting aside, although they've had some missteps and mismanagement, if you ignore the superficial earnings reports and dig deep into the financials, they still look like they're a viable company.

Which, I assume, is why Microsoft is willing to shell out $44 billion to acquire them.

Technically, all buyouts are decided by the shareholders. Usually, a bidder makes an offer and let's the board of the target know beforehand. The board then decides if it is in best interest of shareholders to accept the offer. They then make a recommendation to the shareholders, who actually decide.

Whether the shareholders accept or not doesn't really have any legal impact on the bidder's actions. It's mostly practical. If the bid is accepted, the bidder can look at all the inner workings of the company to see what it's getting itself into. If it's not accepted, they can still make the purchase, they just take on more risk.

Basically, the shareholders can say, "No, fuck you," and the bidder can buy the company anyway by acquiring a majority of the company's stock. There are a number of methods to prevent a hostile takeover, but if a bidder with the resources of Microsoft decides they really have to buy a company, there's not really much that will stop it.

Except, of course, if the Department of Justice decides there are monopoly issues involved, which it could in this case.

I hate to post so early on Saturday morning, but I can't resist the temptation to offer another perspective.

This deal has been in the works for a bit over a year and there are forces at work that you may not appreciate, or even like, but they are at work in nearly all the markets. I don't really understand why Ballmer sees Google as the Bogey Man, but Ray Ozzie (and the failure of MSFT to improve its share price on the basis of its core business) has convinced MSFT to find other sources of revenue. Not unlike the motives that have driven Jobs to the various ventures undertaken inside and outside of Apple.

I'll go a step further here at the risk of taking criticism. Revenues for "web companies" come from subscriptions and advertising. The underlying motive behind the earliest web development was to improve communications and the movement of data, very few people understood how the infrastructure would change the broader worlds of media and entertainment, but the web has rationalized many other forms of consumer-related entertainment and communication. It continues to rationalize many traditional revenue models as well (like music). Traditional software companies struggle to capitalize on their investments in helping create the underlying infrastructure while new business models are introduced on top of that infrastructure every day (Google, Twitter, Facebook, SG, SpiralFrog - couldn't resist throwing in an unknown). So, despite being a $58B company with enormous profits and momentum, the stockmarket will not reward MSFT for sticking to their knitting. When the market fails to reward you for your core business, you go looking for something else to do; explaining the MSFT motives.

Yahoo's motives are different. They've lost the paid search battle to Google and frankly their search has never been that good and they are losing momentum in other segments of the business. Yahoo revenue per employee is sliding, the stock price is sliding, and frankly so is the company's momentum. I hate to see this since I too have had a Yahoo email account since 1996 (and an MSN account since beta in 1995). Hedge funds and Private Equity Groups (PEGS) are running around even today, sharpening their teeth, and considering making an offer for Yahoo; so is NewsCorp. IMO, each of those options is nothing short of awful. To be fair, I doubt that any of them can cobble together a deal as lucrative for Yahoo shareholders as what MSFT will offer. If the Yahoo board rejects the offer from MSFT, the analysts you all hate so much - who often represent the lion's share of stockholders - will bitch slap the Yahoo stock like there is no capital punishment law. Financially, this is a good deal for Yahoo shareholders and a very bad deal if they turn it down.

Before you wade in and slap me around for my capitalist mannerisms, please remember that long before I entered the world of investment banking, I was an entrepreneur having started four other software companies. I've been on the receiving end of this activity and at the point of public announcement, the momentum is nearly impossible to pause.

TechCrunch and several other sites have already waded in regarding which Yahoo properties remain versus which will be integrated into the MSN/Live/Whatever name the Redmondians dream up next. Our firm "enjoys" some limited insight into the MSFT strategy that we cannot share, but knowing what I do, I would not cry for Yahoo. MSFT will certainly botch some of the strategy, integration, and implementation going forward, but I think the industry will benefit from this "masheup," and certainly Yahoo shareholders will benefit.

How did I know this would be in current events. So yea, yesterday was an very interesting day, especially for me, being a Yahoo! Employee for just over two year now. So, I can't disclose any information .... heck ... I don't have any more than the public does. However, just to be reminder everyone ...

This is an "offer" by MS. Far from a done deal. First the board of directors needs to accept the deal, then yes, there is a PUBLIC vote ... of share holders. Then the governments of both the USA and EU will need to give it an OK. The process, with companies this large, will not close in 2008.

From the public comments, and my gut feel (and does not reflect any inside information) is there is still a good chance that Yahoo's board will reject this offer. I think David and Jerry want to run the company as stand alone. MS+Yahoo! does not make any sense. There is also still a possibility some other company will make another offer to acquire Yahoo!. There was also a rumor a while back of a straight up Ebay+Yahoo! Merger.

For the short term - its going to be unknown. There will be a lot of press coverage. Remember - those press writers and analyst don't know jack shit. They are just guessing.

I have to thank MS a bit ... as my ESPP Yahoo! stock was at a lost on Thursday and sold from a 20-30% profit ... so yea, in a strange a perverse way it was a good thing.

Now, what MS has said is they won't take No for an answer, so there might be an hostile attempt for MS to take over Yahoo!. However, all the above still applies.

That all being said, I'm a frontend engineer in one of the "big bets" of the company. We have some awesome improvement coming to Yahoo! in the next 3-4 months. I'm trying my hardest to get these thing launched early. Stay tuned.

Well, if this does go through, I hope somebody creates a good Flickr alternative. I don't even want to think about the implications of an M$ owned Flickr.

Oh noes.


Source

It's difficult to imagine MSFT catching Google in revenues from advertising. Google is smart, fast, and their team is way out in front of the race with experience, insight, and resources.

Yet...the world Google largely created is changing. Some are offering that the market created by Google is becoming commoditized and we don't know how Google will react to change it neither creates or controls. Analysts (financial and industry) are all trying to understand Google's recently shrinking margins and the effect this will have on the company.

Seeing MSFT stagger around the software industry following its own period of control presents an interesting example of what to do, and what not to do.

so Google are going to have their search monopoly (which it pretty much is) challenged, boo fucking hoo.

Looks like Yahoo is exploring all options

The second underlined point I can't speak to (mostly because I don't care about it, or the company itself, for that matter, until they start doing something that I can't get a better version of elsewhere), but wasn't the first point kinda publicly-known?

EDIT: Or is the bigger issue here just talking shop in a non-business environment at all?

Sooooooooooooo should I buy Yahoo stock or what?

I hadn't realized that Yahoo! was still relevant, having had zero interaction with Yahoo! or any Yahoo! branded products (or people other than my mom who did) in several years. Of course, I also didn't realize they owned Flickr.

At this point, I wouldn't be surprised if unofficial Yahoo corporate policy allows them to say whatever they want in any context on their off hours as long as it includes, "Big bets! Awesome improvements! Stay tuned!"

Okay...the sites fucked up and posts are not appearing. This is my third attempt:

Oyaji is spot on. Traders, hedge fund folks, and analysts are digging for information from inside Yahoo or MSFT to set the variables in their models - each of which will run several times over the next few weeks.

Since Google and MSFT by response have taken the issue to the public, the Yahoo executives and board have properly clammed up. I'll bet an email has floated to Yahoo staff to discontinue speculation and public comment until the board completes it fiduciary responsibility and provides guidance to the company(s) that make the offer, the shareholders, and the employees - in that order.

There is enough speculation floating around the related markets to make my life hell right now. I rather wish those 5,000,000 self important bloggers were distracted by another shiny object.

Well, if they are on SG ... then I'd like to meet them.

New products were announced at CES - public. Ebay+Yahoo was an external article I read. Like here or here or other places ... its been rumor for awhile ... actually I think I started the rumor.