Microhoo: The end game

Microhoo: The end game

Summary: It's no longer about whether Microsoft and Yahoo could be a loving and profitable union once they get over their hostilities. At this point it's just about the money.

SHARE:

It's no longer about whether Microsoft and Yahoo could be a loving and profitable union once they get over their hostilities. At this point it's just about the money. But then, it's always been about money.

Yahoo has a few pieces left on the board, but the experts, or at least pundits, view Microsoft's position as stronger. The  forthcoming rejection of Microsoft's bid by Yahoo is merely part of the end game.

Microsoft thinks it needs Yahoo to accelerate its "Live" reinvention, and Yahoo hasn't inspired confidence that it can compete effectively with Google, despite its half a billion users. In its most recent quarter, Yahoo reported a 23 percent drop in profit and an 8 percent increase in revenue compared to the Q4 2006.

Competing with Google on search and ads in a titanic marathon is part of the deal logic, but there is also the pragmatic goal of winning the hearts, minds and wallets of billions of consumers with communications services and applications. Integration will be very difficult, but having a common enemy and goals can be a galvanizing force, if inspirational leadership is leading the charge.

Yahoo postures or signals that it wants $40 per share to Microsoft's $31 offer. Microsoft is running the numbers and may sweeten the offer to something above the initial offer, but not close to $40. No other bidders have appeared and Yahoo hasn't revealed a plan that inspires confidence among shareholders.

And, Google, which cried out that Microhoo could monopolize the Internet, coming to Yahoo's rescue doesn't look promising.

Perhaps this week, with layoffs expected to be announced, Jerry Yang will give a Barak Obama-like State of Yahoo speech that outlines how the company will thrive on its own, sending the stock soaring and staunching a brain drain.

On the quarterly call, Yang said that Yahoo would cut 7 percent of the workforce and heavy investments in "growing strong performing properties." He also said company was not merely “tinkering around the edges.” The news didn't inspire great confidence, but in this turbulent market it's hard for any company to catch a break.

The Microhoo dance is like Oracle's pursuit of BEA. Oracle offered $17 per share, BEA rejected the offer and then came back with $21 per share, and Oracle acquired BEA for $19.375 per share.

There are some nuances in the stock prices and the total cost of ownership. Microsoft bids, Yahoo stock rises, Microsoft goes down. Yahoo counters high, Yahoo stock likely goes down, Microsoft stock does who knows what. The big winners are the bankers, and if Yahoo accepts a deal (closer to $31 than $40), it's shareholders and a good portion of employees waiting for a stock pop will feel satisfied...and will look for new jobs. Note: Based on Microsoft's share price on Friday, the offer is $29 per share.

It's decision time for Jerry Yang and Yahoo's board. Steve Ballmer is waiting with open arms.

ballmeryang.jpg

See Techmeme for the Microhoo coverage swarm

Topics: Microsoft, Banking, Social Enterprise

Kick off your day with ZDNet's daily email newsletter. It's the freshest tech news and opinion, served hot. Get it.

Talkback

10 comments
Log in or register to join the discussion
  • Domain Name Microhoo Not for Sale

    Here's my offer to buy it and Vikram Gautam's reply. So Microsoft and Yahoo better think of another name for their merger if it will really ever happen.

    From: "MicroHoo Vikram Gautam" <info@microhoo.com> Add Mobile Alert
    To: (deleted)
    Subject: Re: i will pay cash
    Date: Sun, 10 Feb 2008 15:21:58 +0530
    ... You are joking, right. I dont mind if the merger happens or not.

    Thanks for your generous offer though.

    Regards.
    ----- Original Message -----
    From: (deleted)
    To: info@microhoo.com
    Sent: Sunday, February 10, 2008 7:15 AM
    Subject: i will pay cash


    I'll pay you $ 10 dollars for your domain name that best fits my business of selling Microhood and Ovens.

    I think this will be the best offer you will have as the planned merger wouldn't push through. Just settle for $ 10 dollars or you could end up losing more money for yearly registration of a name that could be wisely used in selling kitchen products and appliances like Microhood.
    billy yang
  • Yahoo should demand a non-refundable deposit in the case that the deal does

    not go through. This whole thing is very distracting for them, and they could lose employees in the mean time.

    And finally, this may end up being bad for consumers if MS destroys one of the last good Google competitors.
    DonnieBoy
    • The open marketplace

      A thriving marketplace requires many companies competing for customers and
      their money. If it works then a product must be better and/or cheaper in order for
      it to sell.

      Microsoft has shown no talent in the web-space and what incentive would Google
      have to produce better stuff if they become too dominant? The web is platform
      agnostic so they probably can't use their desktop dominance to get unfair
      advantages as before.

      So let's hope that Microsoft doesn't buy Yahoo and that they will have to compete
      on merit instead of buying the talent which seems to be their standard response to
      too good competitors.
      Mikael_z
  • Microsoft will CRUSH Yahoo...

    Yahoo is just an acronym for Yet Another Horrible Online Offering. They should realize this and join forces with Microsoft while SteveB is in the "giving mood". In my communications with Microsoft, I have heard SteveB is in utter SHOCK AND AWE this morning at the news of Yahoo rejecting his bid. Nobody says NO to Steve, and revenge will be his. As a sign of my support, I had my on-call MCSEs block Yahoo again at our ISA Firewall. I also sent out a "State of the Network" email this morning where I threatened anyone who attempts to go to Yahoo.com with termination, and termination without prejudice. The stakes have never been higher.
    Mike Cox
    • What really scares me

      is that Microsoft really believes that it can buy anything in its path, there has been
      plenty of previous companies and dictators in the past with the same attitude and they
      all seen their asses at some stage, we are watching the a company growing beyond its
      own control, trying to cut the company up in pieces wont work since your left with
      several organizations creating a management headache, for sure I dont run a
      company in any special size but yes i do know managment and even more I love to
      read history and one thing that history always does is to repeat it self, come one M$
      show us your butt and get the heck out of business.
      qvtech
      • you must mean like Putin

        in Russia.... :-) here this for you - it's blue
        Paul Fletcher
  • Balderdash!

    Microsoft has *SO* shown acumen and brilliance in the internet! After all, IIS runs on a mere four times the memory required to run the antiquated Apache! And IIS's security makes Apache look like a screen door full of gaping holes!!

    MMPH, I just can't go on . . .
    bbbaldie_z
    • How do you base your numbers

      I mean a simple top (showing running statistics on a unix server) tells me that all my
      clustered web server (8) has been running for 3 years 4 months and 20 days and some
      hours, and how can you say that it only require a mere four times the memory of
      servers such as Apache? running what applications and with what hardware, is it a
      standard xeon with a crappy 1gb of ram or something decent such as a ibm power
      I550 server on how many percentage of cpu? oh sorry i forgot M$ dont have a
      certification to run on a Power based processor, and lastly how much does M$ pay you
      for spreading information that you have no idea about?
      qvtech
  • RE: Microhoo: The end game

    Wow, this is really surprising. I'm actually very proud of Yahoo! and their bold decisions. Guess they won't need this anymore: http://www.5min.com/Video/How-to-Negotiate---Tips-for-Yahoo-5794173
    talmessing@...
  • RE: Microhoo: The end game

    As usual with all such big mergers by companies basically offering the same services and programs the end result will hurt both companies and make for problems with customers using any of the combined services. We saw it with the HP/Compact merger. We saw it with the Sprint/Nextel merger. Mergers come down in the end to winners (buyers) and losers (sellers).

    And the winners don't change to doing business the way the losers did. So for all of us long time Yahoo users it will soon be the end times. Even if Microsoft doesn't take over Yahoo. (And you can bet that the Microsoft money will win in the end.) Yahoo seems destined to be taken over by someone before the end of the year. The Google juggernaut just can???t be faced with out a much larger Microsoft and Yahoo online presence and neither seems able to get it done alone.

    Worse still would be an AOL Yahoo merger. The only company that is a bigger on line failure than Microsoft is AOL. I think that the one last hope for a merger that would make the least change to Yahoo and how they do business would be with Amazon. That seems far from possible at this time. Since Amazon doesn???t have mail or for all practical purposes search out side of their site Yahoo???s services would require little or no change and could survive relatively unscathed.

    People come to love the services they use and to expect them to continue to look, feel, and act the same. I'm just overcoming the change that Yahoo made to their mail service. I can just imagine what Microsoft will do to it. I tried Hot Mail off and on several times over the years and never found it to my liking. But you can bet it will be the format that wins out if Microsoft takes over Yahoo. Winners always set the standards and choose the way things are done. I'm sure that search will have the same problems. The great differences in Mail and Search between Yahoo and Microsoft will be impossible to merge so one will have to change. That means goodbye Yahoo hello new and improved Microsoft/Yahoo.

    And yet some of Yahoo will inevitably survive and cause some changes in Microsoft???s Hot Mail and search services as well. That means that the current Hot Mail and Microsoft search users will not be happy in the end either. The final result will be something more Microsoft than Yahoo but Yahoo enough to displease the Microsoft user base. So the final result of this merger will be a multi-billion dollar lose/ lose proposition with everyone being unhappy in the end.

    If history is any guide the final result of this merger will be:

    Unhappy customers and clients on both sides.

    Falling revenues on increased income due to the cost of changes required to allow for a combining Yahoo/Microsoft mail, the chances to merge both search algorithms, and the problems of absorbing Yahoo???s many diverse holdings while removing conflicting and redundant services.

    A stock and combined company valuation less than the value of the two separate companies before the merger.

    Yahoo users will end up losing the services they have come to love.

    Microsoft users will end up with changes that they don???t like to their services and feel cheated.

    And the value of Microsoft???s stock will fall due to resulting write offs and declining return on equity from the new combined Microsoft/Yahoo. The resulting new company now has went from the old Microsoft with no debt to the new Microsoft/Yahoo company with a rather large loan to pay off.

    Yep it???s the perfect recipe for everyone ending up feeling unhappy and being hurt by the whole process. But I???ll bet that it happens even with both parties knowing the out come as pressures from Google make something like this necessary for either one to compete.
    frankinks