Walk Away, Microsoft
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News Commentary. Yahoo probably wishes you had never crashed this party. |
[Editor's Note: Starting with this post, Microsoft Watch moves to a first-name convention rather than referring to people by the last name.]
Saturday passed. Then Sunday. Now Monday's U.S. markets are closed. Nobody blinked. In the bidding game of chicken, Microsoft and Yahoo are still staring. Microsoft CEO Steve Ballmer imposed a three-week deadline that expired on Saturday without a Yahoo response.
Presumably, Yahoo waits for a better offer, and Microsoft isn't ready to make one. On Thursday, April 24, Microsoft Chief Financial Officer Chris Liddell said "We will reconsider our alternatives" and reveal them this week. He seemed more ready to offer less than more.
Silence could mean the companies are talking. Silence is typical of negotiations going somewhere. In this case, methinks not. Yahoo is stalling, as it has from the start. The board won't willingly sell, not as long as co-founder Jerry Yang is leading a revival.
Today, my colleague Clint Boulton wrote about the Yahoo Open Strategy unveiled last week. The approach is what Microsoft's Live Mesh should be but isn't. Microsoft touts an open strategy that is anything but. Maybe YOS is reason enough for Microsoft to squash Yahoo through acquisition. YOS would further increase Yahoo's competition with Microsoft and its evolving social networking-to-tie-Windows strategy.
Shareholders would be absolutely out of their minds to take Microsoft's money. Yahoo is everywhere on the Internet. It's one of the oldest and most mature dot-coms. Heck, I've got the AT&T U-verse IPTV service, which runs Microsoft Mediaroom software; AT&T has got a deal where I can watch my Flickr slide shows on the big-screen television. (I'm surprised there hasn't been a Flickr user revolt against the merger. I stopped posting to Flickr because of the service's uncertainty.) Yahoo is everywhere.
Yang seems hellbent on taking Yahoo back to its roots, while embracing the Web 2.0 platform's future. I haven't given up on Yahoo, nor have its partners. But clearly some shareholders want Microsoft's money, which is a short-term gain without guaranteed long-term benefits. It's because of these shareholders that Yahoo hasn't fought harder, I think, and it is because of them that Steve could set his three-week deadline.
Earlier today, Marc Andreessen offered a to-the-point analysis of what could happen next in the hostile takeover and what it means. The most chilling scenario is share collapse. Yahoo closed at $26.43 today, April 28. As Marc observes, if either side walks away, Yahoo's stock could drop back down into the $19 range, about where it was when Microsoft made its unsolicited bid. Marc knows a thing or two about getting whipped by Microsoft.
What if Yahoo's board isn't staring Microsoft down for a bigger offer? Shareholder revolt and lawsuits are a reasonable expectation if the deal collapses. But the situation is better for Yahoo's board if Microsoft does the walking. And Jerry and Co. have done lots to show that Microsoft's offer is lowball, that they're holding out for the bigger bid that truly values Yahoo's worth. They can blame Microsoft. But if the bigger bid comes, Yahoo will have to sell, or the board is out of the boardroom and in the courtroom defending against shareholder lawsuits.
What about Microsoft? Should Steve and Chris push for the merger? In February, I wrote about Microsoft's divided corporate mind, how for a time those supporting and opposing the Yahoo takeover shared common goals. Their goals have since diverged. For those Microsoft executives opposing the deal, the time is right to strike. A pull-out would likely cause Yahoo's stock to tank, lead to employee defections and undermine some customers' confidence in the dot-com. For the takeover's supporters, the time has come to admit that Yahoo's resistance has eroded any time-to-market advantages.
Then there is something that Microsoft would never really admit and maybe too many Yahoo shareholders are unwilling to see: Microsoft sucks at making money in online services. Microsoft's longtime efforts to make any real money online should be enough reason for Yahoo shareholders to question what they'll gain by hooking up with Microsoft. Besides, have they looked at Microsoft's stock historicals? The share price is stuck at turn-of-the-millennium levels.
Microsoft's Online Services group lost money (again) during its fiscal second quarter: $228 million. David Card, JupiterResearch's media analyst, summed up first-calendar-quarter worldwide advertising sales:
"Google (ex-TAC) $3.75 billion, up 45%
Yahoo (ex-TAC) $1.1 billion, up 13%
Microsoft (minimal TAC included) $619 million, up 39%"
Microsoft is on the ad sales upswing, but without a $144 million boost from aQuantive, it's only 29 percent growth. Maybe the successful acquisition of aQuantive plays into the reasoning behind why Yahoo would be even better. But Microsoft's ad sales gains even while losing money are reason enough for executives to ask whether or not they really need Yahoo; it will be a bear of integration.
Nearly three months have passed since Microsoft made its unsolicited bid. Yahoo's board doesn't want to sell, at least not for the offering price. It's time Microsoft did the right thing and walked away.
- Yahoo will be left wounded, which is good competitively.
- Yahoo shareholders might turn on the board, which would be even better.
- Shareholder revolt could later lead to a merger for even lower offer.
- Walking away should end some of the division between Microsoft executives and employees over Yahoo.
As for Yahoo shareholders, they shouldn't let themselves be used as Microsoft's instruments of destruction. Through them, Microsoft can destroy the very company from which they hope to gain benefits. Have they got no common sense?
Related Posts:
- Google, Yahoo and the Stanley Cup, Microsoft Watch, April 27, 2008
- Liddell's Ultimatum, Microsoft Watch, April 25, 2008
- Microsoft Shoots for Outer MySpace, Microsoft Watch, April 10, 2008
- Yahoo, Is It AOL, Google, Microsoft or News Corp.?, Microsoft Watch, April 9, 2008
- Yahoo One-Ups Microsoft's 3-Week Threat, Microsoft Watch, April 9, 2008
- Yahoo Boo-Hoos Microsoft, Microsoft Watch, April 7, 2008
- Ballmer's Yahoo FUD Letter, Microsoft Watch, April 6, 2008
- Ballmer Boo-Hoos Yahoo, Microsoft Watch, April 6, 2008
- What 2007 Ad Spending Means to Microhoo, Microsoft Watch, March 26, 2008
- Microsoft Search Retreat Continues, Microsoft Watch, March 19, 2008
- Microsoft's Faulty Math, Microsoft Watch, Feb. 25, 2008
- Microsoft's IBM Moment, Microsoft Watch, Feb. 20, 2008
- Microsoft's One Yahoo Mind Divided, Microsoft Watch, Feb. 12, 2008
- Yahoo Squeaks, Microsoft Squawks, Microsoft Watch, Feb. 11, 2008
- Yahoo's Way Out, Microsoft Watch, Feb. 11, 2008
- The Real Reasons Microsoft Wants to Buy Yahoo, Microsoft Watch, Feb. 6, 2008
- It's No Flickr of Hope, Microsoft Watch, Feb. 4, 2008
- Yahoo Music Is a Real Problem, Microsoft Watch, Feb. 4, 2008
- Yahoo Bid Reveals Microsoft's Fatal Flaw, Microsoft Watch, Feb. 4, 2008
- Is Yahoo Worth the Risk?, Microsoft Watch, Feb. 1, 2008
- How a Yahoo Merger Could Screw Up Microsoft, Microsoft Watch, Feb. 1, 2008
- There's No Must in Microsoft's Yahoo Bid, Microsoft Watch, Feb. 1, 2008
- Why Did Microsoft Yell Yahoo Today?, Microsoft Watch, Feb. 1, 2008
- Will Microsoft Yell Yahoo?, Microsoft Watch, May 4, 2007
Comments (13)
Both sides seem to be waiting for the other side to move, as in some sort of crazy chess game. MS will not acquire yahoo, without increasing the money, and making it an all cash offer. Yahoo stockholders, would be crazy to accept a deal where half the stock is in the form of MS stock.
So where does Monkey Boy go next if not Yahoo? Will they try to buy AOl next? That would be my guess.
Posted by sam | April 28, 2008 7:56 PM
Portuno tried to tell you way back on February 17th
Allow me to introduce myself. My username on Yahoo and various elsewheres is Portuno_Diamo. I shall follow up this post with a number of interesting and informative narratives to explain to you what has been happening with Microsoft and some of the strategies Steve Ballmer may be using to roust you YHOO shareholders and smokescreen the technology industry.
There will likely be a flood of new posters here out to discredit and rail against me, but, since you Yahoo types are much more technologists by nature than they, this is going to be an easy story to tell. They know that and it's going to have them lathered up for quite an entertaining debate.
I'll give them a bit of time to catch up so you can see just what their tactics and story are. Then I'll unload the wagon and you folks can pick and choose through whatever information you care to look at. I also invite you to challenge me where ever you like but please bring your lunch. I can't stand people who throw out a hasty "challenge" only to find they get slammed to the mat and limp away ashamed. So, do your study first, please. I don't want to appear heartless and unkind.
Looking forward to speaking with you all. Have a nice night as it's quite chilly tonight on the San Francisco Peninsula tonight and I'm going to have me longjohns on for comfort. But tomorrow is a new day and the future is a new paradigm for those who do understand the technolgy that's coming. New opportunities to succeed and new opportunities to watch the old ways die.
Why is Microsoft doing what they are doing today?
Tomorrow is a new day and the future is a new paradigm for those who do understand the technolgy that is coming. New opportunities to succeed and new opportunities to watch the old ways die.
*Some things you should know first.
Microsoft is well known for stealing the intellectual property of smaller companies and then muscling the smaller companies into extinction. There is a lawsuit currently under way that alleges Microsoft has used that typical tactic against Vertical Computer Systems (VCSY). The lawsuit concerns two VCSY patents (6826744 and 7076521) that VCSY used to derive products for the software market. VCSY products presage Microsoft products during the period when Bill Gates was touting Microsoft's XML vision back in 2001 onward.
Before we begin the discussion, you should probably have some background on the patents and what they do. I thought this would also be an opportunity for you to see some scenarios that explain why Microsoft can't perform on the internet and why they need somebody like Yahoo to accomplish the effort. If Microsoft does not have the ability to work the web, they will be marooned on their proprietary platform and whither away. Perhaps the best thing would be for Yahoo to avoid acquisition by Microsoft, so Microsoft could eventually
be broken up and the sum of their parts sold and spun off to retrieve value for their shareholders who are down 40%+ percent since 2000 when Ballmer took over as CEO. So, I offer these posts I wrote last year. You'll see in other posts how the situation predicted Microsoft would not be able to front web products and would be forced to go looking for such
technology to act as their web-facing front as the VCSY vs. Microsoft trial approaches.
March 7th brought a report by the court-ordered negotiator and the results of the discovery phase before the East Texas judge so learning this information at this historical point will help outline the actions and events in the industry... and that includes (especially includes, I say) Microsoft.
Microsoft is in a difficult position and that's what has driven Microsoft to acquire Yahoo. Withoout Yahoo, Microsoft is going to have to develop their own internet technology. But, it's not like they haven't been trying. They've spent (wasted) billions of dollars and years of lead time and they've failed.
So begin reading here and we'll discuss the technology with time:
Much more at url
http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_Y/threadview?m=tm&bn=20360&tid=861593&mid=861713&tof=1&rt=1&frt=2&off=1
Posted by I-Man | April 28, 2008 8:10 PM
Joe, thanks for the use of the stage!
And let's get a look at some of these posters who have tried to help drive VCSY out of business over the last 8 years, this poster below
the_original_al-coholic_2004 also posts as vcsy_stock_scam
(vcsy_stock_scam is the username selected to make sure the reader is prejudiced against VCSY the minute the reader sees the post.
I'm sure somebody's going to want to know why this poster is using that username and what his motive is for discrediting VCSY as a publicly owned company.)
the_original_al-coholic_2004
35/Male
In Da Bar,
obviously in your fevered insanity caused by losing 99.9% of your investment in vcsy.ob (only you would be that fuking dumb to keep holding), you no longer recognize when someone is "agitated" & when Al is laughing his @ss off at you fuking bagholding dipsh1ts.
What's coming you ask? If Al (& vcsy stock scam, & Kalafella, & numerous other posters) read the public filings right, inevitable bankruptcy for vcsy.ob.
-----------------------------------------------
You can see much more of these posters who have trashed all of the conversation around VCSY.
at url:
http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_V/forumview?bn=33693
Posted by I-Man | April 28, 2008 8:45 PM
While Yahoo is certainly one of the oldest dot com companies out there, my bet is still on Google for the long-term.
Posted by JM | April 28, 2008 10:13 PM
Yahoo! This is going to be interesting!
Posted by Partners in Grime | April 29, 2008 12:45 AM
YOS has a street value of $50M, yet MSFT is willing to pay $44B to squash it. Joe, c'mon man. That is some weakass analysis.
Posted by uhura | April 29, 2008 3:01 AM
Joe, do you think your readers are entitled to know what is happening with Microsoft? Do the right thing Joe!(Below is the best link to educate your readers)
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Portuno's Blog
Won't this piss off the neighbors?
I thought you might like to see what Bill Gates said Microsoft would be able to do... back in 2002.
http://ajaxamine.tripod.com/PortPot/index.blog/1809883/what-did-farmer-brown-plant/
Isn't it ironic Bill left Microsoft never having had the opportunity to pull off his grandest vision? Isn't even sadder irony a great architect like Ray Ozzie is relegated to building a web platform off of tinker toys and vapor described as "clouds"? I might as well call my farts "bouquets".
Oh well, Microsoft has their problems with technology... but, boy, did they act like they were going to tear up the place with their grand XML software.
Where is it, Ray?
Posted by I-Man | April 29, 2008 4:14 AM
Rome was not built in one day!.
If one looks at the scenario, Microsoft is a successful profitable company. Fortune list Microsoft as one of the 20 most profitable companies across all industries and #1 in Tech. This does not come easily.
Microsoft is not a one trick pony. It thas its tenacles across homes and businesses. Yes thru its years some wars were bloody. But it has has managed to stay in tact and fight.
My opinion is, if Yahoo saz yes, it is o.k. If not it is wise for Microsoft to walk away. Cash is king, escpecially now when US and possibly the world is going to go thru a monitory trumoil. Microsoft can wait and IF they still need Yahoo 6 months from now, they can still pick it up.
Posted by Krishna Prasad | April 29, 2008 8:10 AM
Joe. Please do something about this I-Man spam. DON'T YOU SEE IT IS GARBAGE SPAM MESSING WITH AN OTHERWISE AWESOME FORMAT? PLEASE JOE PLEASE. IT HAS NO PLACE HERE.
Posted by I-Man Heart VCSY | April 29, 2008 9:48 AM
This is bad for Ms in two ways
If Ms does buy Yahoo, there is no serious analyst that can think that will go well for MS.
If Ms doesn't buy Yahoo.. Ms knows that it will be almost impossible to catch up with Google (well, it was impossible anyway, but...hope doesn't die easily.)
Ms couldn't ever have bid for Yahoo. The best option is not to buy Yahoo-but loss of prestige and morale have a price. Another thing which could be terrible is that Yahoo wakes up (nothing better than a hostile bid for that). It is very possible that Yahoo gets to "cooperate" with Google (Google needs Yahoo to distance it from Ms and the thing about monopoly). Perhaps now Yahoo's shares will fall a tad, but we all have acknowledged that the Internet is the future and thus, that there is money in it (otherwise, why then would MS despair so?)
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But I understand to Ms (and Ballmer):
Microsoft earnings post-mortem: The cash cows quiver
/blogs.zdnet.com/microsoft/?p=1362
I’d be more inclined to agree with MSFTextrememakeover, who speculated that a higher-than-expected XP vs. Vista mix could be one of the culprits for Windows client’s poor showing:
“I’m going with IDC and guessing a mix shift back to lower priced/lower margin XP and towards Linux in UMPCs (ultra-mobile PCs) and emerging markets is what is really responsible for the miss - which is even more concerning.”
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Posted by Marco | April 29, 2008 2:15 PM
Microsoft stock has fallen last week, due to earnings report. Microsoft bid includes (cash + stock). The bid offer actually worths a few billion less than it did couple of weeks ago.Wonder if that is a coincidense.... It's Microsoft we are talking here. No way...
Posted by evan | April 29, 2008 4:30 PM
Looks like "Mr. Steve" threw a chair through the Yahoo wall, and now feels a need to buy the entire house to repair the damage.
Remember, if Gary Kildall had signed the contract when IBM arrived, "Mr. Bill & Mr. Steve" would be working for DRI.
(and, Mr. Steve might well be "mates" with with Mr. Kenneth & Mr. Jeffery)
http://www.cadigital.com/kildall.htm
RIP.
Gary Kildall died in July 1994 at the age of 52. Many of his contributions to the personal computer industry are still not common knowlege.
Posted by RobV | April 30, 2008 9:55 AM
Again ignorance is bliss here.
Your missunderstanding of mesh and weather it is open or not is the epitome of ignorance.
It is funny how the Mac watch is pro-mac but the Microsoft watch is a hate microsoft. Bias much?
Like other MS open access projects, the acqusition of Yahoo would do two things.
1. Give a strong finiancial backing the the open access and interface of the yahoo products, and improve both Yahoo's and MS's search and client tools.
Posted by Brian | April 30, 2008 2:08 PM