YaAOLhoo? Are you kidding?

The Times of London is, I think, exaggerating a rumor that Yahoo and AOL might merge in an effort to find off the Microsoft takeover of Yahoo.      I don’t even think this is necessarily a bad idea if you made sure the management of both companies had the necessary shakeups to turn *both* companies around from what seem like desparate corporate positions.  However it just doesn’t ring likely to me at all, and begs the question of how the Yahoo board could make all this work *and* avoid the wrath of the market which probably will view the Microsoft offer as far more favorable than a pie in the sky possible AOL deal.    That said, I’m open to this possibility.    The main thing I’m *against* is more of the same from Yahoo.    Profits and share price matter more than any anti-Microsoft sensibilities, and the board should keep that top of mind at all times. 

Disclosure:  Long on Yahoo 

Wal-Mart for Nobel Peace Prize!

Wow, this clever article by John Tierny  in New York Times Op-Ed (what a great news source now that the paywall is down!) suggests maybe the Nobel Peace Prize should go to Wal-Mart for lifting more people out of poverty than pretty much any other organization on earth.  He notes a notion that the best route out of poverty for the developing world is to make stuff for Wal-Mart to sell to … those of us who live in the developed world.

This is a provocative piece but it cleverly *should* get people to realize the complexity of economics, and the fallacy of ideas that prosperity in the developed world comes from exploitation in the developing world.  This last notion is one of my pet peeves because it is a very naive and inaccurate view of the way international economics works.   Systems that avoid capitalism and avoid interacting with capitalism don’t thrive.   In fact they perform abysmally as indicated by the experiences of early communism, and present conditions in North Korean and Cuba.    Prosperity comes from becoming part of the developing world through economic interactions.    This is not the whole solution to poverty, but it is an important part of that solution.   If well intentioned people would work to understand the importance of getting poor folks *involved* with the globalized economic experience  it would be easier to bring the billion+ in extreme poverty to a higher standard of living.     It does NOT end there of course.   I’m happy to see organizations try to force corporations to greater levels of worker responsibilities.  But that needs to happen *after* workers and countries show that they want to play the big game.   

As Tierney suggests, making stuff for Wal-Mart is probably one of the fastest ways an Indian or Chinese guy can feed their family.  What’s wrong with that?  (I’m serious – there are some problems with that approach, but I’ve gone on long enough here for now ….)

Microsoft v. Yahoo. They can’t seem to make an offer Yahoo can’t refuse.

The big tech story remains the Microsoft offer to buy Yahoo, and on Wednesday a meeting at the Yahoo’s HQ in Sunnyvale, CA may seal the deal, though it’s more likely that negotiations will continue for some time after that meeting.

Microsoft may be wondering about the wisdom of the aquisition given how hard the market appears to have punished them for the offer.   Although other tech stocks were down last week, Microsoft’s 13% drop amounted to a loss in capitalization equal to almost the entire value of the Yahoo deal.   ie you could argue that even if Yahoo sold themselves to Microsoft for $1 on Wednesday, the boost in the merged company value would not make the two any more valuable than *Microsoft along* was worth before all this began.     That’s a lot of financial simplification but Microsoft must have at least somewhat more skepticism about all this than they did as they made this offer.

So, what are the likely strategies here?     It is clear Yahoo will reject the current Microsoft Offer which amounts to about $30 per share, and they are strongly rumored to be asking Microsoft for $40 per share.   I’ll eat my keyboard if Microsoft agrees to $40, but I do think they may immediately counter offer at about $34 per share.     Of course unless the inclinations of the Yahoo board change they’ll reject this as well.    I’m growing somewhat suspicous that the unreasonable $40 amount is not really an attempt to boost the sales price – it may be the best way for the Yahoo board to send negative signals, try to wait things out, and give Microsoft more chances to back out.   If Microsoft gets cold feet from the share price drops or Yahoo’s chilly reception of the merger idea, and then backs out of the deal, shareholder lawsuits against the Yahoo board are less likely and weaker.  The Yahoo board will simply say the $40 was a negotiating tactic that went wrong rather than a tactic to kill a good deal.

However I don’t think Microsoft is going to go softly into the night on this, and that will make all this very interesting.    They’ll offer more, and at even $34 per share Yahoo would be getting an amount approaching a 100% premium over their recent 52 week low of about $18 per share.  This is the price YHOO traded at following the bad guidance from the recent earnings call.  

It strains the credulity of this shareholder to see how the Yahoo board can argue that Yahoo has a realistic shot at being “twice as valuable” as they were last week in a reasonable time frame.   In short, we all know they can’t.    This may be a defect of market forces or employee attrition or lazy management or low morale or Google defections or whatever, but left to her own devices Yahoo is pretty much going nowhere fast.   I’ve been bullish on Yahoo for several years now and remain convinced that the company can eventually turn things around.  However I think this aquisition may be 1) part of that turnaround process and  2) presents an offer far too good to refuse without risking a share price meltdown.

So, looks to me that on Wednesday the Yahoo board will turn down the current offer, Microsoft will up the offer to about $34, and Yahoo board will turn that down too (probably the following week).  This will lead to nothing short of a Yahoo shareholder revolt as anxious investors watch a company throw away tens of billions of birds in the hand arguing they are seeking a few more birds in the internet bush.

Ha – even Mini Microsoft hates the deal.   An interesting salary debate over there along with the normal absurd whining from developers over their already very large salaries. 

Disclosure:  Long on Yahoo (but not for long!?)

New York Times on Microsoft and Mashups … and Mashup Camp 6 is coming!

You know mashups have hit the mainstream when they hit the NY Times, and this article is a nice introduction to Mashups and why they have become a key component of “Web 2.0”.    

Mashups in music are songs that combine words and/or music from 2 or more songs, and internet mashups are similar – generally they are a combination of the information from 2 or more websites or data sources into one site.   Zillow.com, for example, is an excellent mashup that takes real estate information and “mashes it” with mapping information, so you can navigate homes and prices via maps as well as in other ways.    Also in typical Web 2.0 mashup fashion, Zillow offers “APIs” or “Application Program Interfaces”   which are tools that allow simple integration of Zillow into your own website.

Mashups are not new but as they, and other Web 2.0 sensibilities, become the backbone of the new internet they represent a significant new direction in online life and computing.    Although the internet started out as a fairly open environment, the advent of big money led many websites and services to force users to pay for content and services.   “Paywalls” at sites like the New York Times, Salon, and others meant that you could not get at the stories unless you subscribed.     These paywalls are coming down now in favor of advertising supported revenue models and more open environments where websites tend to share data and even advanced technologies in exchange for the benefit of appearing as a link or an information box within other sites. 

Still confused?    Frankly, I don’t think anybody can even hope to digest the tidal waves of innovation and information that flood over the internet on a daily basis.    But if you want to understand more about mashups there is no better conference than Mashup Camp 6 coming up in in Silicon Valley in March.    David Berlind and Doug Gold started these camps a few years ago and they are a superb way to get up to speed very quickly on how mashups are …. changing everything.