Thanks to Long Zheng for this post at his blog “istartedsomething.com” about a couple of Microsoft Videos showcasing the MS vision of gadgets and interactions in the future. The shorter video is neat but it was a sequence in the long one that really, REALLY got my attention. Using surface computing (which is already a robust application), on a transparent wall, two kids in classrooms thousands of miles away from each other were reacting in real time and in *different languages* as their voices were translated instantly for the other student. The technology driving this application is pretty much here now although I think there’d be some challenges making it work as fast as in the video, but this is the kind of stuff that is so provocative, powerful, and cool that it brings a technology teardrop to my eye.
In a world challenged so dramatically by a combination of ignorance and misunderstanding, how much progress could we make with technologies like this that cross connect people and cultures almost seamlessly? Obviously we have a long way to go and this is technology for the rich folks among those in our global family, but as these technologies penetrate into affluent or lucky schools the appeal and testing will continue until we can have much wider distribution.
After Yahoo turned down Microsoft’s offer of over $31 per share there has not been much good news for a troubled Yahoo, with a price now right about *half* what Microsoft offered. However it does appear that Yahoo will merge with another struggling internet empire: AOL. Time Warner’s merger with AOL years ago will probably go down as one of the most misguided corporate marriages in history leading as it did to nothing but heartaches and lowered TW values, but the Yahoo deal actually seems to make a lot of sense to me if Yahoo can get it’s management act in gear. With AOL Yahoo will control even more valuable internet items such as about half of all the email accounts in the world. Some reports suggest that Microsoft may have even more interest in a combined Yahoo AOL. In today’s challenged fiscal environment it seems unlikely Yahoo could refuse another MS takeover even at a reduced cost per share.
Microsoft Chief Steve Ballmer spoke to the Microsofties today about the companies plans. For Yahoo merger followers there was nothign much new as he simply reiterated this point:
Related to Google and our search strategy are the discussions we had with Yahoo. I want to emphasize the point I’ve been making all along—Yahoo was a tactic, not a strategy. We want to accelerate our share of search queries and create a bigger pool of advertisers, and Yahoo would have helped us get there faster. But we will get there with or without Yahoo. We have the right people, we’ve made incredible progress in our technology, and we’ll continue to make smart investments that will enable us to build an industry-leading business.
Some would argue that the reason Microsoft needs Yahoo is that their online strategy has so far failed to do very much. My take is that they have not moved the online market as they’d hoped, but that they also have not worked nearly as hard in this area as they could have because Microsoft (correctly) sees that their huge presence in the software market is where the big money remains, at least for the next few years. They have chosen in large part to protect their huge revenue ship rather than act more aggressively and nimbly (and expensively) to find online revenues or pull market share from Google. I think many analysts – especially those in blogging – fail to recognize that Google’s revenues simply pale in comparison to Microsoft’s. Google has the lion’s share of online money but Microsoft still has the lion’s share of the lion’s share money, which is in software, gaming, and entertainment. I agree that the power curve is shifting from MS to Google, but MS remains the 800 pound revenue Gorilla. Money beats buzz to the bank every time, and this point is not lost on Microsoft or Google.
Yahoo and Microsoft haven’t been able to agree on very much over the last few months so it now appears fairly likely the battle will head into the shareholder meeting on August 1st.
Microsoft hasn’t lost many of these matches and the smart money remains on them to “win” this battle and take over Yahoo. My take is that there is now enough ego investment on all sides that you can expect Microsoft to be pretty ruthless in their efforts to replace the board and overhaul the company. Of course with with management leaving Yahoo at a record pace anyway, Microsoft is likely to inherit more of a management skeleton than a burden, and they are probably fine with this.
How poison will Yahoo make the pill? As a shareholder I’m concerned about this but comforted that the current board and Jerry Yang have a huge financial stake in this outcome. To Bostock and Yang’s huge credit they has been playing this game with their own money, though I’d argue they have not been playing it very well or with anybody’s best interests in mind (including their own). My take is that Yahoo simply could not readjust their expectations from the dramatic success story they enjoyed early on and the belief they could see that kind of success again. This gave them a perception of the current value of Yahoo that was completely out of line with the market perception, which by definition is the real value of a company. The $33 sale price has come from the desparate realization by Yahoo that they are going to lose the battle and possibly be forced to sell well below this price, though I think it’ll be in Microsoft’s interest to keep the tensions to a minimum and keep their new “post Yahoo merger” shareholders marginally happy with an offer above $30.
That said, Ballmer is clearly smelling the blood in the water and could probably force an eventual sale of Yahoo in mid to high twenties by jerking the strings for a few more months to soften up Icahn and other major shareholders who are clearly looking for something above the $31 offer Yahoo rejected a short time ago. Without Microsoft Yahoo’s share price would be well under $20 and this is now clear to everybody.
So the boxing match moves into the final rounds. It’s pretty much a corporate death match between Jerry “the Yahoo” Yang and Steve “the Basher” Ballmer. Although my money is invested with Jerry right now, I’d be betting on Ballmer to win this fight.
Microsoft’s very well played game to win Yahoo at a bargain price is wrapping up even more favorably than Microsoft planned. Yahoo refused the Icahn MS offer today to buy just pieces of the company, though in typical fashion Yahoo did not outline many details of their decision making process, rather they simply asserted it was a bad idea.
Obviously this was a strategic rather than serious move by MS as noted by Henry Blodget, though he’s wrong to think this is just a small play to soften up the Yahoo board before the proxy fight in August.
In fact this is the end game of a very smart plan by Ballmer / MS to aquire everything for less than they have been planning to pay for over a year. Yahoo’s intransigence has simply delayed the process by a few months and saved MS a few dollars per share on what they would have paid.
Over at Silicon Valley Insider we have Henry basically begging for an offer over $31 and indicating support for less.
Yahoo board is now *begging* MS for the $33 they could have had easily a few months ago but may not see again. MS can get it all for less so I’m now guessing the meeting offer will be $31 or $32. That will make MS look generous for keeping to the original plan in the face of a weakening Yahoo, and it will be acceptable to shareholders fearful of YHOO at $18 or lower if this all collapses.
Although this is likely to be resolved at or soon after the upcoming Yahoo board meeting it doesn’t have to resolve to work in MS’s favor. Yahoo’s pretty much exhausted all their options to the extent that it’s either Yahoo in the 30 range with Microsoft or Yahoo under 20 without MS.
The Wall Street Journal has a great summary of the breakdown of the initial Yahoo Microsoft merger talks a few months ago, complete with something of a play by play in how corporate strategies on both sides …failed. My read is that the personal mix of Yang and Ballmer was probably all wrong for this, though I still think that part of Yang and Yahoo board’s idea was to play foolishly hard to get in an effort to either kill the deal or boost the price to an unreasonably high $37.
It’s now clear that strategy failed and I’m sticking to my prediction when all this began – Yahoo will be sold to Microsoft, who might work with other partners in the deal, for very close to $35 per share.
Microsoft and Yahoo are clearly back at the table and I think it is even clearer than before that a deal will be done. I’m compelled to say “I told you so” and I’m looking forward to looking up the many foolish stories written last month that suggested the deal was clearly over when it was obvious then and now that this is a deal that is very unlikely to die.
Yahoo’s plans for reorganizing their reorganization have now been announced. Kara seems to have the best scoops on this.
Meet the new boss Sue Decker, same as the old boss.
I am paraphrasing somewhat, but IMHO this is the gist of the Yahoo reorganization, sung to the tune of the Who’s: “Won’t Get Fooled Again”:
Yahoo’s fighting on the screen.
Over revenues unseen.
All the money that we worship will soon be gone.
And the Yang who spurred us on.
Sits in judgement – Ballmer’s wrong!
They decide and the board all sings the song.
I’ll tip my hat to Yahoo constitution
Take a bow for Yahoo revolution
Smile and grin at the change all around me
Open my laptop and play
Just like yesterday
Then I’ll get on my knees and pray
We don’t get fooled again
[scream guest appearance by Carl Icahn: YAAAAAAAAAAAAAAAAHHHHH!]
One of the really intriguing aspects of the blogOspheric chatterfest is how the big markets tend to react to rumors from key business related blogs. When TechCrunch reported yesterday that talks between Microsoft and Yahoo had resumed Yahoo stock increased, only to fall after several other blogs reported the rumors as false or weak.
Although I have no reason to believe that Mike Arrington or Henry Blodget are trading options based on their market-moving blog reporting, I’m not at all clear it would be illegal for them to do so as long as they were reporting “real” rumors.
Henry answered at his blog that posting a false rumor to manipulate for investment purposes would likely be seen by SEC as a violation but this leaves a lot of gray areas open for an aggressive options trader/journalist.
Here’s what I just asked Mike Arrington over at TechCrunch: Mike just to set the record straight the ValleyWag poster “Mike Arrington”, who claims to have made 10k trading on Yahoo rumors, is fake … right?
More importantly I’m very interested in your views on legality/ethics of trading Yahoo options based on the rumor mill. Let’s say you heard a solid rumor that MS was about to offer $37 for Yahoo and Yahoo was going to sell. Could you legally trade on that before you posted it? One second after?
What if you emailed *me* right before you posted, I think I could legally trade based on current SEC rules, right?
P.S. What kind of Single Malt Scotch do you like? : )
Although I have no plans to manipulate any markets, it is reasonable to assume that if a market can be legally manipulated it *will be* manipulated, and soon.
The New York Times seems to agree with critics who suggest Yahoo’s board was not acting in the interest of shareholders as it fought off Microsoft offers for the company, including a final offer that in my view will prove to be somethng of an on-the-table smoking gun in this matter since Yahoo rejected a deal that would have allowed them to improve their own search monetizing routines rather than simply outsource them to Google.
The fact that Jerry Yang and David Filo, and the Yahoo board have a huge paper loss should give everybody pause to wonder about whether they may be rightt. Perhaps keeping Yahoo pristine for a few years, unsullied by Microsoft’s cash and worldview, will lead to much higher stock prices?
…. or perhaps optimism and MS hostility has trumped common sense.
What did the normally very insightful Tim O’Reilly and Fred Wilson have for lunch, some free hallucinogenic deserts over at Google?
Both are criticizing Mike Arrington for stating the obvious – Yahoo’s not acting in the best interest of shareholders or Yahoo or anybody except Google, who clearly is the big winner in Yahoo’s squandered megadeal with Microsoft.
Fred very correctly notes that Yahoo’s has faced leadership challenges for a long time, but he says he likes the one option that keeps the current Yahoo board intact and very much on track for much more of the same company crushing behavior. Yes, a clean house is needed and that is certainly less likely to happen *now*.
It seems to me there are two issues and they have it wrong on both counts where Arrington’s got it right.
First, Yahoo’s Google move proved that in terms of shareholder obligations it should have sold to MS. Yahoo cannot reasonably make a case that they will come out of the monetization hole using core values while immediately outsourcing their most potentially lucrative biz to Google. Sure this will make more than Yahoo alone, but nothing like what the MS deal would have offered Yahoo in terms of ad cash plus money to develop the search biz. MS offered a shot at glory. Yahoo took Google’s money so they could keep sitting back and watching the really big search money pass them by.
Is Fred saying there is a Googley path back to $34+ per share? Even if yes, it is nonsense to think it’ll happen fast enough to justify turning down MS’s offer of $34 and their subsequent offer of $35 for 1 in 6 of Yahoo’s outstanding shares.
Second, this just gives Google even more of a near monopoly on monetization. As Mike suggests competiton is lacking and needed in the search space. This is a big step in the wrong direction.