
Microsoft bids $44.6 billion for Yahoo - surya
http://news.yahoo.com/s/ap/20080201/ap_on_hi_te/microsoft_yahoo
======
hugh
This could be good news for startups. Suggested business plan:

1\. Find something Yahoo currently does well (e.g. flickr)

2\. Make a clone of it.

3\. Wait for Microsoft to ruin the original.

~~~
michaelneale
You jest, but seriously that makes sense.

Heck you could SAY that it "replaces" Microsoft Flickr, and that would be
perfectly valid !

I think it is indeed a happy day for startups.

------
danielha
I was just casually talking about this with an early ex-Yahoo yesterday. We
were just pondering the possibilities for Yahoo in 2008. Holy shit -- what a
coincidence.

He said this: A Microsoft deal is unlikely because (when he was there) all the
Yahoos hated Microsoft. If an acquisition happens, it'd be hostile and the
core guys will jump ship.

I nodded in agreement. But then this happens.

~~~
bkrausz
As a current Yahoo I'd have to disagree, from what I've seen in my department
(and the departments in my building), I don't think the company is
particularly hostile to Microsoft. Plus, the stock price is so low that I
think a lot of Yahoos would welcome a big change, if for nothing else then to
boost their portfolio.

At the very least I'd be interested to see how Microsoft could integrate such
a huge company properly. I had discussed the idea 6 months ago when the rumor
began to surface, the big question (if it happens) is how the two cultures and
systems would merge...I think it would take years before they would actually
operate as one company.

~~~
alaskamiller
It's simple. Half of you will all be fired and Yahoo will merge with MSN to
create a monstrosity web division. The overlap in web products will create 3
tiers of service, the windows-ized integrated Live products (Live Mail, Live
Search), the consumer centric Yahoo products (Yahoo Mail, Yahoo Search), and
the pro-sumer products (Inktomi Search, Flickr, Delicious). This will be so
confusing and stupid that after 2 or 3 years of Google eating their lunch
they're fire the rest of the Yahoo staff and shutter off the Yahoo branded
products in favor of the Live products.

But also, let's not kid ourselves, Microsoft could give two shits about
Flickr. What they really want is Yahoo/Overture/Panama or whatever. That's the
expected growth and cash cow that makes this deal possible.

~~~
bkrausz
A little harsh, no?

You forget that Yahoo has over 120 properties, what about things like Yahoo
Autos, Real Estate, Shopping, Finance, etc? There's significant overlap with
what MS offers, yet Yahoo is clearly kicking their asses in many of these. I
highly doubt MS would kill off the more-popular site/name for their own,
especially if it could give competition a chance to jump in as the new #1.

Also, things like Flickr and Delicious could do very good things to MS's
perceived image in future generations, so there's more here than just cash.

~~~
alaskamiller
Why does Yahoo have over 120 properties and 14,000 people but only make 660m
in net profits? Microsoft has already declared that this merger will create a
1 billion operating efficiency. Guess where that's going to come from?

And Yahoo might have more popular destination sites but Microsoft has the lock
on operating system. MSN/Live is seen as a cloud computing services for the
_future_, Microsoft would rather saving those than the multiple Yahoo turds.
How's Brickhouse doing? They pumping out hits yet? How about 360? Mash? Pipes?
What about those landing pages for products? That whole group is gone.

Most of the hardcore people from Flickr, ie. those whining separate login
people, will be jumping ship the second this deal is inked. Instead you'll
just end up with a shell of a service but again, Microsoft could care less.
They'll just slap it on to Windows Pictures like they slapped Hotmail onto
Windows Mail. And the masses will gobble it up because to them it doesn't
matter.

If anything, this will be great for Windows 7 if it ever comes out. On your
computer is Microsoft, on the web it will be Microsoft apps with Yahoo names
and the products will actually not suck as bad. What Yahoo also needs to do is
to properly tie in all its features and properties to formulate a social
network. They have every single parts required but just lack the skeleton to
bind it all together. Hmm... What company does Microsoft have an interest in
that's like a social network... Hmm...

EDIT: As an addendum to this, I just read Gruber's opinion on the merger and
he agrees with my premise. Microsoft culture will pounce Yahoo culture.
Yahoo's products (web1.0/2.0 lamp stacks) will be naturally converted to
Microsoft technology (yay windows 2000!) because at the end of the day the
Borg can't stop. So if you have a job at Yahoo it's best to polish up your
resume and if you're a Yahoo user be ready to get a Windows Live account. The
name might be Yahoo but the backend's going to be .NET and if it's not Flickr
or Delicious then most likely you won't be able to use it.

------
drusenko
One thing quite a few people are failing to notice when describing the "huge"
premium of 62%: look at Yahoo's historical stock price charts for the last few
months or so. Yahoo's taken a real big hit, likely for several reasons that
are beyond its control, and it might very well be undervalued. This could be a
great chance for MS to give an offer price that Yahoo was trading at a month
ago but now seems generous.

~~~
fauigerzigerk
A company that's been declining for 8 quarters in a row and trades at 40 times
earnings (before the Microsoft offer) is not undervalued.

~~~
joeguilmette
it's rare to see such simple, fundamental and spot on analysis in the tech
world.

microsoft's bid on yahoo is a perfect illustration of why microsoft is doomed
to failure.

how many startups could they fund with $45 billion? 100? 200? 1000? why
exactly do they want to be at the helm of a slowly dying web portal left over
from the first dot com boom?

i remember someone talking of microsoft and relating their situation to a
victim in a horror film. we can all see the monster lurking behind them,
slowly creeping in for the kill. when the sea change of personal computing
really does come, whenever that may be, microsoft will not be there, they will
be knee deep in shit, trying to claw themselves out of the hole that they've
spent the last five years tirelessly digging.

~~~
danielha

      >> how many startups could they fund with $45 billion? 
      100? 200? 1000? why exactly do they want to be at the helm
      of a slowly dying web portal left over from the first dot com boom?
    

I understand the "startups are king" mentality around here, but _come on_.
Regardless of their quarterly performance, Yahoo! is one of the biggest brand
names on the web. Microsoft won't establish a bigger web presence by "funding
startups."

~~~
davidw
Exactly. When companies get as big as MS, they need big wins. Big companies
never seem to be interested in or capable of managing and dealing with lots of
small deals - perhaps it would be too much of a hassle chasing a lot of small
fry even though a few will eventually take off.

------
cawel
The Economist's take a it:
[http://www.economist.com/daily/news/displaystory.cfm?story_i...](http://www.economist.com/daily/news/displaystory.cfm?story_id=10632491)

"Microsoft is desperate to grab a bigger share of the online-advertising
market because many of its software products are being challenged by free,
advertising-supported services offered by Google. The company is also worried
that Google's dominance in search and advertising allows it to dictate terms
to advertisers, and gives it an unfair advantage over its smaller rivals."

------
damon
Microsoft is _still_ dead.

~~~
ardit33
naw, they are the 1600lb gorrilla now. No matter how incompetent they are,
they have enough momentum and cash to just smash thru obstacles (either buy or
try to fail other startups).

~~~
axod
Reminds me of myself and my brother playing monopoly as kids. He suggested he
start with all the property, and I start with all the money.

I was young... 6 maybe, so I thought wow yeah heh I'll take all the money.

Sure, MS have cash from their dying desktop, but they still can't build web
apps, or compete with google online. I'd say yahoo are almost as bad.

~~~
abstractbill
_He suggested he start with all the property, and I start with all the money._

I remember being pretty damn pleased with myself when you agreed to that ;-)

------
jmzachary
Interesting move especially in the context of a recent Garner report
predicting bad times for Microsoft
([http://www.news.com/8301-13860_3-9862322-56.html?tag=nefd.to...](http://www.news.com/8301-13860_3-9862322-56.html?tag=nefd.top)).
Obviously, this acquisition doesn't help Microsoft improve Vista or Office,
Microsoft's cash machines. Also, does this offer imply Microsoft is less
confident about their Live initiative? Will Ray Ozzie be replaced by Jerry
Yang?

~~~
aston
Pretty sure if it's Ozzie vs. Yang, Yang is out in a heartbeat.

And I think this buy is more about strengthening Microsoft's online presence,
not their desktop apps.

------
ChaitanyaSai
Some seemingly minor issues make me wonder how bad a situation Yahoo is in.
Google has integrated their messenger into chat well enough that you can
search through chats, grouped separately, as well as send messages of either
kind to people you have contacted through chat or email. This makes a whole
lot of sense, and I would think is relatively easy to accomplish. However,
Yahoo's messenger is a bloated spam attracting monstrosity that seems like an
estranged sibling to Yahoo's equally hideous email service; all the
distressing genetic similarities but no conversation. Now how can a company
that couldn't integrate two obvious candidates from their own bundle of
services do in Microsoft, which isn't any better at integrating its own
cluster? I don't see synergy.

~~~
dean
You don't have to read much of the business literature to discover that
mergers and acquisitions, especially at this scale, rarely produce the
expected synergies. All in all, I think this is good news for Google.

------
ardit33
Holly... For some reason I imagine MSFT as the big borg spaceship coming close
and just swalloing this smaller ship called yahoo, and casting a large shadow
into google and the whole valley area.

~~~
papersmith
I think it's more like dreadnoughts vs. a F-16.

------
Tichy
I for one think it is a good idea. Maybe with Microsoft's start page, Yahoo
search could get more traffic and the recognition it deserves. Microsoft
Online Services could be scraped completely, nobody would miss them.

Server tech would be a concern, but who knows - perhaps rather than switching
everything to Windows servers, Microsoft might take the chance to become
acquainted with Linux and BSD. It would make sense if MS would in the future
simply release a theme for Gnome, rather than waste resources on another OS
that nobody wants.

------
doubleplus
Grr. I just interviewed for a position at Yahoo on Wednesday.

------
some
How could an offer, that is 62% higher then the price at the stockmarket be
refused?

~~~
food79
Stock prices are weird. The current value is where half the people think the
price is too low and half the people think the price is too high. Of course
everyone who still has Yahoo stock think that the price is too low--because
everyone who thinks the price is too high has already sold their shares.

So everyone who still holds any given stock thinks that the market price is
too low.

~~~
Xichekolas
A simpler explanation is that everyone holding a stock wants it to go up so
they can profit. When it goes up to a point where they don't think it's too
low, they sell it, and hence no longer own it. So everyone that owns a stock
thinks it's too low.

------
wallflower
It's easy to cheer on Google, as Google as they systematically takes on
established vertical markets (to sell advertising) and do fairly well in some
of them. Why not root for the underdog, Yahoo + MSFT?

~~~
Xichekolas
Because it's fun to cheer on the underdog if the underdog is better and the
established players are just bumbling idiots holding down the underdog via
cheating and uncompetitive strategies.

Trying to claim that YHOO/MSFT is (technically) better than Google and that
Google is just a bumbling idiot trying to hold down YHOO/MSFT via cheating and
uncompetitive practices is a bit of a stretch, even for the seriously deluded
among us.

------
iamelgringo
I doubt that Yahoo's board and shareholders will accept the deal. It would be
a good way for Microsoft to spend some of it's extra cash, though without
getting in to regulatory trouble.

~~~
aston
It's in shareholders' interest to take that huge per-share premium and run
with it. Better than holding Yahoo! until it's a penny stock.

------
DaniFong
"We have dedicated considerable time and resources to an analysis of a
potential transaction and are confident that the combination will receive all
necessary regulatory approvals."

Uh, really?

~~~
aston
If the biggest advertising entity on the web (Google) can buy one of the other
biggest advertising entities (Doubleclick), I'm pretty sure one of the also-
rans can buy another also-ran.

~~~
anewaccountname
The difference is there is practically no lock-in in advertising systems--
Microsoft has demonstrated repeatedly that it will use it's OS monopoly to
unfairly leverage things online. If you think they have failed miserably,
consider that it was only because of the anti-trust rulings that beige box
makers got the right to change the start page.

Also, much of Google's "monopoly" comes from a source that is heavily
protected by law: the pagerank patent. Patents are government granted
monopolies with limited time; as such, there is little or no legal recourse as
any mildly abusive behaviour is expected, tolerated, and what the system was
designed to provide.

------
mark-t
It's just occurred to me that I'll have to switch my domain name registrar if
this happens. Damn.

------
DarrenStuart
its a good deal for stockholders I think. If you read the hype Yahoo is not
doing to great(which I find hard to believe as they make a load of cash).

I think the combined search powers could be really good.

~~~
joeguilmette
[http://finance.google.com/finance?fstype=ii&q=NASDAQ:YHO...](http://finance.google.com/finance?fstype=ii&q=NASDAQ:YHOO)

take a look at the annual data. they may be profitable, but a 62% fall in net
income over 3 years, that's pretty bad.

~~~
DarrenStuart
yeah good point but they are not losing money and I think you will see google
do the same thing in a few years once they hit the peak for their products.

Yahoo's problem seems to be the management and the fact they are still playing
catch up with adsense.

------
chaostheory
crap... given MS's history with standards, I should switch from yui's css
framework to another one if the bid goes through

~~~
agotterer
Think they will move everything to MS servers and re-write in .net?! heh

~~~
bayareaguy
Not if they actually care about ROI. They got no benefit other than PR when
they moved Hotmail to windows.

~~~
nradov
Actually they got a huge benefit. They had internal users doing a high-volume
stress test on Windows and associated middleware, so a lot of bugs got found
and fixed. The products now are noticeably more reliable.

~~~
bayareaguy
I was only thinking about whether or not their actions improved Hotmail.

To learn how to make a Windows web service work, they buy a FreeBSD based one
and then spend 5 years replacing FreeBSD with Windows.

What an expensive way to do QA.

------
lst
Micrahoo? Yahsoft? Yicrosooft? Macroyoft?

I'm confused...

~~~
pg
I think the hope is: Microsoft!

~~~
dfranke
My hope is !Microsoft.

------
DXL
The market is reacting very positively: Yahoo is up almost 60% in pre-market
trading, at a market cap of $40B (up from $26B at yesterday's close).
Microsoft is down 4% however.

~~~
tlrobinson
The stock market continues to baffle me.

Microsoft is offering $31 per share of Yahoo. YHOO is now trading at nearly
$31, up from $19 at the close yesterday.

Why would anyone pay $31 for a share of Yahoo right now? There are two
possible outcomes: 1) the deal goes through, and you get your $31 back either
in Microsoft stock or cash. No net gain. 2) The deal doesn't go through and
YHOO drops back to around $19, losing you about 30%.

Am I missing something?

~~~
dean
This always happens with buyout offers, the buyee's stock price shoots up
close to the amount of the buyout offer, but never reaches it. It generally
stops a couple dollars short of the buyout price. At this moment, Yahoo is
trading at $28.25, still low enough to make a sure-thing couple of bucks per
share. It's a gamble though. If the deal falls through, or gets blocked by the
government, the buyee's stock price drops back down to where it was before the
offer .

~~~
anewaccountname
>This always happens with buyout offers

Everyone thinks they know so much more than the market. In this thread so far
I have seen you claim the stock always goes (slightly) lower than the offer,
and another guy express puzzlement as to why YHOO even managed to exceed the
offer at times today. I hope neither of you were trading BEA Oracle offered ~6
billion, BEA rejected it, and 3 months later Oracle offered ~8billion and BEA
accepted. One other thing to keep in mind (this is more picking on the other
guy than on you) is that when these deals are announced they are often largely
made up of stock (Microsoft is so buried in cash that might not be the case
here). If Yahoo! accepted the offer right now, it still might end up with a
different future value. Luckily it is not to hard to factor that out by
purchasing various positions or leveraged vehicles in or relating to
Microsoft/whoever-the-aquirer-may-be.

~~~
dean
I was not trading BEA when Oracle made the bid to buy them out. Why? What
happened to BEA's stock price during these two offers? Did it not move at all?
Did it go beyond the offer price? Somewhere in between?

