Hey look! I wrote about something I said I was going to write about… it must be some kind of miracle. Don’t get too comfortable, life’s only getting busier.
So here’s the IT news story of the quarter: on Friday Microsoft offered up $44.6 Billion for Yahoo! (which will no longer have a “!” in behind it, because I think that’s just stupid). Microsoft’s offer comes at $31 a share- a 62% premium above Yahoo’s (then) trade price.
Let me start out by saying: I saw this coming. Ok, now let me be honest by saying: Holy crap that- that was a gigantic lie. As I’ve said before, I like making predictions about tech because it’s always evolving and continuously developing beyond what is actually predictable. Well as much as I think I track tech trends well I missed this one by a mile. I honestly thought this was a two month early April fools joke. Honestly.
For the three weeks prior to MS’s huge bid, all of the big tech bloggers were trying to determine Yahoo’s failing future. Seeing as how just one week ago Yahoo just cut 1000 jobs after its profits were down nearly 25%, it comes as no surprise that the following stories were run: Yahoo Asks Employees to Turn in Computers, At Yahoo even the Layoffs are Botched, and my favorite- Yahoo Shuttle Buses on the Chopping Block?
But it’s been tricky for me to make sense of all of this. If everyone is saying that Yahoo is dead all while it is cutting jobs and losing employees, where the heck did this 62% premium come from? Let’s go through the list!
Reasons Yahoo isn’t worth the money
- It’s a dying company, losing money quarter over quarter
- It can’t keep its employees (layoffs)
- It can’t keep its executives (quittings and poachings)
- It is over spending without returning value (Zimbra was sitting idle until today read on for more)
- It just keeps making failing online services
Reasons why Yahoo is worth the money
- To compete against Google.
- It gets more traffic than Google (due to its large email user base combined with the search function) and could easily be turned for ad revenue.
- Yahoo owns Flickr, the most popular photo sharing site online.
- It has recently acquired numerous smaller companies and open source code projects (Zimbra is a seriously strong application… and strangely, during all of this hoplah, Yahoo has been in recent talks to acquire one of my favorite Cambridge companies, Maven Networks.)
- The acquisition would give Microsoft a casual email client to compete with Google’s gmail.
- Yahoo’s forums and games bring the social aspect of what MS has been trying (and failing) to create with Live.com
- Yahoo’s failed online services (multiple social networks, mp3 services, blog tools, etc) would provide functional code to fan MS’s flame for competing with Google’s open social platform.
- Yahoo Mobile. It actually doesn’t suck and MS could integrate it within Live Search Mobile to make a highly functional device that could compete with Google’s upcoming Android.
Wow, I actually came up with more than I expected there. My original intention was to say that Microsoft overplayed its hand… but huh- with these benefits, a 62% premium doesn’t sound too crazy. Well things are starting to get more interesting, as rumors are beginning to circulate about Google putting a bid in on Yahoo. This is just nuts and I don’t know what sense to make of it. Which is to bad considering the title of this post.
And the biggest part to all of this is the traffic. If 2005-2007 were any predictor of online focus (which of course, they are), 2008 will be even more about targeted traffic advertising through search results. Let’s look at a chart of traffic to see how this makes sense for MS’s failing Live.com (PS - compete.com is awesome)
But to me this all seems somewhat irrelevant. When I see someone on Yahoo mail or searching using Yahoo, my first thought is “wow, I didn’t know people still use that thing”, as if it’s a home phone or something… not yet dead, but just tremendously lacking in the light of better alternatives.
But what do you think? Should Yahoo take it? Is big G going to step in and make this interesting? I obviously need help on this one- chime in and let’s get a discussion going.
February 5th, 2008 at 9:07 pm
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February 6th, 2008 at 11:42 am
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February 7th, 2008 at 11:20 am
I have a lot to say about, but I don’t want to bore anyone so I will try to keep it relatively short.
Let’s cut to the chase about what this is all about. 3 words. INTERNET OPERATING SYSTEM. I can see it now - Microsoft Vista Internet Desktop. Look, Microsoft didn’t get to where it is today by being dumb. They’re smart, smart as hell and they know that the lifespan of desktop based operating systems are limited. Zach’s comments about Live are correct, it’s cool and all, but no one uses it. They need an in…somewhere and this is it and at the perfect time.
Yahoo came out with it’s earnings report last week and if it wasn’t for Microsoft you would have seen their shares plummet. They didn’t meet the streets expectations and haven’t in a long time…BUT it’s still a good company. This is (was) the perfect opportunity for Microsoft to enter a bid. They have plenty of cash so why not?
Of course, this isn’t all a done deal. There have been rumors that Yahoo may want to outsource its search engine to Google if that meant not being bought by Microsoft. Ironic, isn’t it? Yahoo may need Google to save it from Microsoft to save it from
Google.
Anyways, let’s not get off course. It’s a good move for Microsoft (and I actually think an even better move for Google to let it happen). Microsoft needs an a better in on the Internet. They rule the desktop game, but certainly not the net. Google has that one tied down. Unfortunately for them, the future ins’t on in the desktop thing. Buying Yahoo now, at the price they did was a good move. A few billion here and there to them doesn’t matter, they just want Yahoo….and in a sense need them.
Now, why should Google let this go through? Because….it eliminates their only true online competitor into the hands of…I hate to say, but non-innovative Microsoft. Google won’t be beat by Microhoo and when they come out with an internet OS, their slogan doesn’t have to be too catchy - just, “it isn’t Windows”. I think this all makes Google’s future, even brighter.
Yeah so I jumped around a little, but it’s all on the same topic.
Thoughts?
February 7th, 2008 at 3:52 pm
Wow, just wow. Great stuff. Let’s get an “Internet Operating System” debate going. Now known as the IOS debate…
Here’s what I love about your argument: the part about Google allowing MSFT and Yahoo to join. I’ll take it a step further: Google needs Microsoft to enter the IOS arena.
gOS is prepping a huge launch into the IOS world, but they know better than trying to be the innovators… what I mean by this is that if the public sees Microsoft do something, they will accept it as a genuine step in technological advancement. Then, as you said, Google comes in as the “not-microsoft” and steals the show.
Hell, just look at the way the iPhone was the most “innovative” product in years, which was a sleeker version of what WinMo has been doing for years (again though, much, much sleeker…).
Often, tech innovations are too far advanced beyond what we will currently accept- so the public rejects them. But if there are multiple companies competing in the same space, then the public will adopt the functionality much quicker.
Unfortunately we still have a few years until speeds (and security) are strong enough to support an IOS, but that just gives Microhoo and Google-(insert all the companies they’re going to be buying here) a chance to develop some killer web desktops.
February 12th, 2008 at 8:31 pm
[...] want to take a minute to go over all the hooplah that’s hit the web this since I last posted on the Yahoo/Microsoft deal. Let’s start with some hard facts before moving into complete [...]