

Pmarca: If Microsoft goes fully hostile on Yahoo - rantfoil
http://blog.pmarca.com/2008/04/if-microsoft-go.html

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jrockway
Wow, this is an incredibly well-written article. I'm looking forward to seeing
what happens; each of the situations will make for interesting reading :)

~~~
pchristensen
I'm glad someone else said it. An article so great that you can't avoid voting
it up, but is so thorough that there's nothing to comment on besides "READ
THIS!"

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neilk
Whatever awards they pass out for blogs, I'm voting for Marc. He seems to be
in an ideal state of disinterest. He isn't concerned about blog revenues or
"access" and he has strategically valuable information and experience. Yet
somehow he writes the blog anyway. Maybe because he still self-identifies as a
hacker, and educating the internet by posting is still part of his value
system.

(That said, you can't trust much of what he says about Ning, but it is unclear
how much of this is pride and how much is spin.)

Also, he can afford to do crazy things like ask a few lawyers what the likely
endgames are. But you would think that the SJ Mercury would have done the same
thing, and yet their article over the weekend wasn't nearly as good. Compare:
[http://www.mercurynews.com//ci_9073065?IADID=Search-
www.merc...](http://www.mercurynews.com//ci_9073065?IADID=Search-
www.mercurynews.com-www.mercurynews.com)

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neilc

      On the other hand, suppose Microsoft then raises its bid
      to $33/share, and then News Corp. holds its bid at
      $32/share. Could Yahoo's board still take News Corp.'s
      bid in preference to Microsoft's? In a word: no. When a
      board is presented with multiple offers, it can either
      take the highest objective offer or it can turn down all
      the offers. It cannot take an offer lower than the
      highest objective offer.
    

That makes absolutely no sense to me -- the board should have the ability to
discriminate among offers on factors beyond the mere acquisition price.
Suppose there is an insignificant difference in price between two offers, but
one of the offers makes more strategic sense -- in terms of how the new
company will align with the buyer's current interests and assets, the buyer's
long-term proposed strategy, the strength of their management team, the
buyer's financial condition, etc. Forcing the board to choose the higher offer
seems remarkably short-sighted: shouldn't the board be concerned with
maximizing _long-term_ shareholder value?

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emmett
The shareholders are getting paid _right now_. That is their long term value.
Microsoft buys Yahoo, shareholders get a 50% premium on the value of their
shares cash.

Like he says, if part of the offer is in stock, you can use long term
projections of the value of that stock as part of the valuation. But it's
unlikely Microsoft stock will fall greatly any time soon.

~~~
rbanffy
Well... Bill promised Windows 7 by mid 2009. If it fails as completely as
Vista, there won't before much long-term value for Microsoft out of the
corporate high-inertia market.

Either way, it will be fun to watch.

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hacklite

        "Google has a dual-class share structure that gives Larry Page, Sergey
        Brin, and Eric Schmidt de facto total control over the company, and 
        investors certainly haven't avoided Google's stock as a result.
    
        Yahoo does not have a dual-class share structure, and it's too late to put 
        one into place now.
    
        If Yahoo did have a dual-class share structure, Yahoo's cofounders would
        have been much better situated to block Microsoft from attempting a 
        takeover.
    
        You can bet that this is being noticed by the founders of every technology
        company that might go public from here on out."
    

Does YC structure things this way?

~~~
ivankirigin
These two classes are for public stock offerings. YC companies might choose
this type once they go public. Broadly, stock in YC companies is either common
like the shares for the founders, employee options, or they're preferred,
which is often what investors own. There are specific benefits to preferred
stock - different depending on the terms of the deal.

Control in a startup is largely determined by percentage ownership and and the
composition of the board.

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mechanical_fish
Wow, the game sure does makes more sense once you've read this scorecard.

I would comment on one statement:

 _Microsoft could take its $44 billion and go buy virtually every new Internet
company of any consequence founded in the last 10 years..._

He means "every consequential Internet company that hasn't already been bought
by Google or Yahoo". That's a rather different set.

Particularly in light of the fact that Microsoft doesn't seem to be motivated
by a desire to grow their business through innovation. I sense that their real
motivation here is to buy a big, expensive label that says INNOVATIVE and
plaster it all over Microsoft in an effort to make the company _seem_
relevant. So buying (e.g.) three tiny, modestly profitable, innovative photo-
sharing sites, along with their brilliant founders, will not do; Microsoft
wants Flickr. Because Flickr has the headlines.

~~~
noodle
while its true that a lot of consequential companies have been purchased by
google or yahoo, a decent number of these companies were just the best of a
group of similar apps.

microsoft could swoop in and buy the second choices and get a similar
portfolio together quickly, building off of them. their portfolio might be
overall crappier, but it will be similar and their weight behind it will be a
serious driver.

having said that, i'd think that a big problem they might have is the burning
desire to have everything built on .net, and most apps online are not build on
.net.

~~~
Xichekolas
If you drink the network-effect kool-aid, then 'second best' is usually the
same thing as 'worthless' ... although I think the parallel existence of
things like Facebook and Myspace (and AIM/yahoo chat/MSN chat/jabber) are
proof that this kool-aid is probably bullshit.

As for .NET, the fact that most startups don't choose it should probably send
a pretty strong signal to Microsoft that there is something wrong with it. On
the other hand, the .NET team could simply be happy targeting "enterprise
webapps" (non-startups), in which case there is nothing wrong with .NET, and
something wrong with their acquisition criteria.

So basically, if Microsoft really wanted to pour that $44 billion into buying
every up-and-comer, they need to pay attention to the team, and not the
implementation, and then back that up by not forcing everything it buys to be
rewritten in some Microsoft-sanctioned technology.

That is why the Yahoo acquisition has never made sense to me. Either Microsoft
is going to spend inordinate amounts of time converting Yahoo's LAMP stack to
it's own ecosystem (and fall way behind Google/ebay), or they are going to
finally run a LAMP stack themselves, which seems to undermine the .NET
ecosystem (not eating their own dogfood, etc).

Of course, they could fix this problem if they gave up trying to create a
parallel, all-Microsoft stack and made their stuff play nice with everything
else out there on the wild wild web (with less effort wasted on duplicating
existing open technologies).

But that would require Microsoft to make the transition to providing a
_service_ (support/training/_ahem_ ad placement/etc) rather than a _product_
(windows/office). When the product simply becomes a means to get people to pay
for your service, suddenly giving the product away and making it play well
with others is a great idea.

When Google was spinning out new apps every week a few years ago, everyone
accused them of just running a lot of loss leaders to feed traffic to adwords.
Well of course that is what they were doing. The fallacy was thinking that the
apps were supposed to be individually profitable. In reality they are all just
'products' that get people to pay for the 'service' (ad placement). Of course
they are going to provide all these products for free. You don't charge people
for business cards do you?

Microsoft is trying to do this I think with their subscription model stuff.
The problem is that they just charge too much, so there is still an incentive
to get around paying. It's like high taxes provide an incentive to find a
loophole, whereas low taxes are just easier to pay than avoid. If they gave
away Windows and just charged some low amount for automatic updates and remote
assistance, they'd probably have a workable business model there. Whether it'd
be as profitable as their current model is another consideration.

Anyway, I'm significantly off topic, so I'll rein it in. Wasn't expecting my
train of thought on this to run on so long. In summary, I think Microsoft is
hosed unless they open up their ecosystem and play nice, and unless they find
a new way to give away products and charge for services.

~~~
ashu
Regarding your .NET comment, I don't think it's .NET that's the problem. It's
Windows that hackers cringe with.

~~~
rbanffy
I am an equal opportunity cringer. I cringe at .NET, Java and Windows. I don't
like OSX's lack of package management but, apart from that, I'm OK with it.

Hackers are clever people. It pays to observe them.

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jeroen
Things to remember (and do, if it ever comes to that with your startup):

"Many public companies have a "staggered" board, where some directors are up
for election or reelection each year, but the entire board is never up for
reelection in a single year."

"A dual-class share structure is when a company's founding managers or
investors own a different kind of stock that gives them voting control of the
company even when they don't own a majority of the total shares."

