This is a company that's essentially had multiple parts of it for sale for the better part of 4 years and this hasn't once come out.
I'm running through all the Yahoo corporate filings that Bloomberg has indexed and I can't find any link to this clause.
I mean this is a very material issue!
If you are to be a share holder in a company that's trying to broker a 3-4 Billion sale of some of its assets, then knowing that the buyer may be on the hook for an additional 1 billion bill probably means that the asset you thought you owned is probably worth 20-25% less than you originally thought.
Someone isn't going to be very happy with the yahoo leadership today:)
> Affiliate Commitments. The Company is obligated to make payments, which represent TAC, to its Affiliates. As of December 31, 2014, these commitments totaled $2,087 million, of which $505 million will be payable in 2015, $401 million will be payable in 2016, $400 million will be payable in 2017, $375 million will be payable in 2018, and $375 million will be payable in 2019, and $31 million will be payable thereafter.
as a $375mm reference but that's to all TAC; not just Mozilla. Not in research so def could have missed it.
Kara Swisher doesn't seem to provide any indication of where the information she's reporting came from. Furthermore, the link she provides at the end (as a well-done "warts-and-all" account of the deal) claims that Mozilla stands to lose money if a deal goes through...
She claims to have seen the contract in the first line of the article.
Not saying that will always work, but it did work for me (it wasn't a billion though (obviously), but a few hundred K).
Given $YHOO price hasn't moved materially this week, it seems likely that the market (including potential buyers) was aware of the Mozilla deal and priced it in.
But yes, this does look like yet another miscalculation and failure of vision.
As I noted before, she was never at the senior VP level at Google (i.e. reporting to the CEO). So she just didn't have enough experience at that level.
It seems like she got the CEO job based on name recognition, and not a track record of leadership and business acumen.
It's interesting to consider the outrage about CEO pay in light of this. Sure, there are plenty of shitty CEOs who don't deserve their compensation. But you have to respect the fact that, at this level, if you aren't sharp, you'll be fleeced by your peers (i.e. De Castro, and whoever negotiated the Mozilla deal). You don't want to work for a CEO who is getting the short end of the stick all the time.
In addition to Steve Jobs' talents as a product person, he also never got the short end of any deal. (I'm saying that as a person who has never really used Apple products.) I was astounded that he basically did a reverse takeover of TWO COMPANIES -- Apple when he returned, and Disney via Pixar. He negotiated with all the thugs in the movie and music businesses. There aren't many tech CEOs who can do that.
I forget where, but I recall some anecdotes about being on the other side of the table with Bob Iger... saying that those guys basically threatened to physically harm you, and that their threats were actually credible!!! Like you should be scared for your life when messing with those guys :)
I always assumed there were some shark lawyers behind these deals, does the CEO really ignore advice and go it alone? In Mayer's case it really does seem so, but a non-sharp CEO should still be able to not be eaten alive if they bring good counsel to the table (though I guess that itself is the sign of being sharp!).
I think she understood the consequences but thought that the risk was worth the reward. In some cases I think personal hubris was involved.
I don't do Billion dollar deals but I've done my share of 7 figure ones. At some point in every negotiation you need to tell your attorney that you understand the risks and you're willing to accept those risks or nothing would ever get signed. I think Marissa was convinced the Mozilla deal would be huge for Yahoo. She likely didn't think or care if the company got sold (honestly in that case she's probably out so there's no personal risk for her) and she was convinced DeCastro would be able to do at Yahoo what he was able to do at Google.
So she understood the consequences, but just had no clue as to their likelihood or didn't care because she would be set financially? It's horrible either way, she should not be negotiating deals at all.
they're in a bidding war for mozilla with Google and Bing. Yahoo needs their traffic and is willing to exceed the price of the other buyers.. but it's well known that Yahoo has been struggling for years. So a cautious Mozilla would not take their offer unless it was substantially higher, or had some kind of protection if yahoo fails. Yahoo offers this clause, since Mozilla wouldn't do the deal otherwise.
Remember Mozilla wasn't desperate. They could have accepted another offer for at least $300m/year. Yahoo would have been seen as higher risk... people talk every few months about yahoo like it's a miracle they still exist.
Now, I don't know what happened. but yahoo agreeing to this does not necessarily mean Marissa is incompetent or didn't care or whatever.
Likelihood is probability based on factors, each of which has different weight and is again based on other factors. In hindsight, the likelihood seems obvious; when she was making the decision, not so much.
It worked for them in the short term. The traffic enabled them to raise more money and eventually IPO.
Mayer probably thought a similar shoot-the-moon risk was necessary for Yahoo.
Amen to that!
The leadership / negotiation prowess includes the ability to pick, hire, delegate and trust good people.
It is not a coincidence that she was neither able to negotiate a good deal but also failed to negotiate hiring competent advisors. There is a large overlap there.
Perhaps behind De Castro is a competent group of lawyers or advisors as well.
Though she did negotiate herself one hell of a contract. When it personally counts she finds competent people to negotiate!
It's exactly the same reason that programmers need to be interviewed by programmers, and programmers prefer to work for managers that were programmers. You really do have to understand something about someone's job if you will manage them (and potentially fire them).
People with specialized knowledge will do all sorts of things to mislead you about their job performance -- doesn't matter if it's an engineer, lawyer, or finance person.
When you live in such places you become used to the ebb and flow of negotiating, the give and take.
If the only time you negotiate anything, it's worth millions, you might not be well practiced.
What are the lessons of haggling, then?
Dont know how effectivr that would be in an 8 figure deal, but I reckon the lessons are somewhat applicable
wow. if true, that's the strongest evidence i've ever heard in favor of jobs' negotiating skills.
have you got a source for that? not that i don't believe it, i'd just like to read more about it, in context.
Would you be as good at negotiating if you're dealing with Leonardo DiCaprio? Or would the 'halo effect' be too overwhelming?
but giving someone a $58m bonus (severence... lol) for a year of work is not a consequence of 'sharp' vs. 'not sharp', it's a consequence of simply not giving a shit about the money because half (or more) of your motivation is probably pilfering the company coffers for you and your cronies to begin with.
none of the yahoo story seems like incompetence to me. it seems like a straight up robbery. everyone calling her incompetent, or dumb, or whatever, has got 'naive' stamped across their forehead.
1) develop a reputation for being a good negotiator, because that will help in future negotiations
2) actually build the company rather than raid it, because that will lead to better jobs down the road / better reputation.
I mean, she's not a finance type. Those guys do just raid and rob. Someone who wants to raid companies doesn't join a 10 person startup out of college, toiling away to acquire users.
haha. dude. she's in her 40s and worth $500M (and growing) now. she is obviously pilfering yahoo and enriching herself and her friends. things change. people change. sometimes for the worse.
ironically, the corporate raider types are the ones who are currently trying to stop her, because she is killing the golden goose that has lined their pockets for decades.
to be quite honest i wouldn't be surprised if her loyalties still lay with the google cabal. you know what one great way to get rid of a major competitor is? become ceo and sack the joint. genius!
I believe that is now known as "Elop-ing."
It is not like she'll need to quickly look for a job and will be ruined if nobody hires her afterwards. She could retire any second and do nothing for the rest of her life, which she might as well do.
Quite opposite, in fact. The only way for her to get to the billionaire club would be if Yahoo was a wildly successfully turnaround. She clearly wanted to be Big Boss pretty bad, though.
uh, does it matter? that's how it ended up.
Basically, she negotiated every deal, acquisition, etc. as if the absolute best case was a certainty, because that was the limit of her experience. Now she knows that cargo-culting free food and fancy parties does not a successful business make.
Sometimes the situation calls for rolling the dice and hoping for the best. Before we call her business acumen in to question, we should know the incentives set forth to her by the board, and what agenda they may have set for her. Incentive wise, stock options often push executives towards riskier plans of action.
And agenda wise, it may be that she's been brought in to sell to a competitor like Google. Outbidding Google for the FF contract seems like a reasonable plan to buy more things Google is interested in. Recruiting executives from Google to help negotiate a buyout might also be a good plan if they bring enough information with them.
Or Google's other traffic buying programs.
Last acts of a dying company?
Google is light years ahead of Yahoo in PR.
I don't know a ton on how to take a company private, especially after she's in a position she's in now but...if I were her, I'd leverage everything I had and take Yahoo private. Just like Dell did and turn the company around without all the public pressure.
PS: I know it seems crazy but CXX jobs other than CEO can really make ~85million per year. Often because they could be the CEO of another company.
> PS: I know it seems crazy but CXX jobs other than CEO can really make ~85million per year. Often because they could be the CEO of another company.
$85m a year would be top 5 CEO and that top 5 typically changes based on who got a big grant that year. It's certainly not typical compensation. In fact he was the highest paid COO in the country.
That she agreed on Mozilla's change-of-control clause—so Mozilla can just walk away in case of a M&A deal and still get $1B—is simply disconcerting.
I do not have any insights and why she gave in on this point but I know that one of her main skills and responsibilities in her position is to negotiate well and do proper deals. She had to negotiate this change-of-control clause away or to let Mozilla sacrifice on the payout if they walk away. Moreover and considering that Mozilla doesn't have that many financial potential search partner options (Google has been with Chrome rather a competitor for many years now), this should have been possible, I'd assume with my limited knowledge.
I do not like if random forum guys like me are bashing CEOs, I know that this is the toughest job and I don't want to pass judgement on decisions I don't have insights on. But this is really, really weird and Marissa should have known that this bummer will pop up at the next due diligence and create distrust ('are they more time bombs at Yahoo? lets dig deeper') or just reduce the deal value or just increase deal complexity later.
Maybe she didn't think about M&A at that time and she was rather in a fire-and-forget mode but a CEO is always supposed to think about what happens if new shareholders join, about the next due diligence, heck just about the future of the company and eventually, to keep the company always in a proper and clean state and not leaving time bombs for potential successors.
If you assume the board offered her the position in with the expectation of negotiating a purchase by Google, then the M&A deal costs Mozilla very little -- Google was the previous contract holder, and remains so in many markets.
- $375M/year to Mozilla, with the clause to keep paying for 3 more years if Mozilla doesn't want to do business with Yahoo's new owner.
- $450M/year to Mozilla, with no such clause.
The former seems like the smarter deal for Yahoo to make if they want to focus on being successful rather than on being bought. It only sounds problematic if you start focusing primarily on getting acquired.
Right. Wonder if she honestly thought this would have fixed anything or she knew the train is headed to the final station and just wanted to be surrounded by a group she picked and the only way to get them to do that was was to buy her friends.
It is always fascinating to watch a company like that, and wonder if executives still privately believe it is a salvageable situation or they just put up a face and ride the gravy train with some nice golden parachute contract clauses. They probably have to use euphemisms and hints with the board and other top level people to convey their suspicion of viability, as they don't want to be negative and just too pessimistic as it makes them look like liars in press releases, but they can't also be completely oblivious either, that looks bad as well.
A friend of mine involved in offer negotiation at another company who was at one point (this was perhaps 5-6 years ago) trying to poach some high level Yahoo infrastructure folks told me that a lot of senior Yahoo engineers had straight cash compensation packages that rivaled what Google or Facebook would pay in cash + RSUs.
Presumably these were folks involved in directly maintaining core revenue generating ad systems who would be very expensive and painful to lose / replace.
In the context of that negotiation I could certainly see it coming up that Yahoo! might be acquired and Mozilla wanted some assurances if they went with Yahoo!. So neither Bing nor Google has that concern, so Yahoo! is the only one exposed.
90M USD cash, 140M USD investments in 2014.
At that, what are the employees doing? Rust is fantastic and important, but Opus has been pretty done for years, Daala is still DOA, isn't Xiph an independent organization?
Firefox still gets an enormous amount of development effort. I think people don't notice because Chrome likely just gets an order of magnitude more.
Xiph is independent but I believe Mozilla employs all the core developers. They're currently working on doing for video codecs what Opus did for audio.
That being said, I'm not actually that well informed about Chrome's development, so it could also be that I've simply missed some of their development plans...
I've honestly never really understood how the two are actually related and how Mozilla can be both a nonprofit and a corporation. Talking to some Mozilla employees in IRC and in person, they never seem to think too hard about this either.
> The consolidated financial statements include the accounts of the Foundation and its wholly-owned subsidiary, the Corporation (collectively “Mozilla”). All significant intercompany accounts and transactions have been eliminated.
IIUC, receiving revenue would be more complicated if the transactions were undertaken directly with the not-for-profit foundation. Certainly many "non-profits" do receive transactional revenue, i.e. hospitals, but in that case they often have a number of subsidiaries -- for example one subsidiary actually employs the physicians, another signs funding contracts with the NSF/NIH and distributes grant revenue, a holding company owns the buildings, etc. Accounting is complicated (perhaps more accurately: "the tax code is complicated").
And while I would like to understand it better for curiosity's sake, I'm personally okay with it being the way it is, on the basis that people who understand this stuff better than me don't seem to complain about it.
Like, seriously, journalists just love to report how evil the innocent-thought Mozilla is, and often even drift off into pure nonsense to do so. So, if there really was anything to be said about their for-profit side, I figure, I would have heard of it by now.
Other than that, Thunderbird could certainly do with a bit of cash and Firefox OS is also currently being rolled out on a few TV sets, so could certainly use some financing to fix up initial bugs.
And if they really have nothing else to finance, they often also just redistribute money to other smaller open-source projects...
Halfheartedly trying to catch up with Chrome.
Interesting and great, but ultimately Yak shaving exercises like supporting Rust.
Rust is probably the most notable project built by Mozilla after Firefox at this current stage.
I don't think the documentation part of that is gonna take 15k USD.
When Eich did resign conservatives boycotted Mozilla with the Nozilla campain because they gave into Liberals.
So Mozilla got hit by both sides of politics.
This insurance policy is both literal -- if Yahoo does sell, whatever hardship that causes Mozilla will be eased considerably by all that cash -- and figurative -- Yahoo's willingness to offer such a payout should a sale happen signals to Mozilla that Yahoo's leadership is probably not actively pursuing a sale. (Or at least wasn't, at the time the deal was made.) The theory on the latter part being that no rational person would make that offer if they thought a sale was in any way likely.
But Mozilla might have a bit of PR challenge on its hands if they walked away... :-)
they would finally be free...
But yeah lack of competition in that space is an issue. Search is still hugely important.
As a comparison, DDG is serving about 10M searches/day. Google serves that amount every 5 seconds.
"Here's a payment and an increase in share worth $1.3B. If that's not acceptable, we'll publicly announce this afternoon that we're not renewing our deal."
If they buyer is interested in maintaining a search presence, they'll almost have to negotiate an extension right away?
Is this a normal phrase in the enterprise world? I don't think I've ever heard it before.
Same goes for the IE team: http://thenextweb.com/insider/2012/10/27/mozilla-sends-the-i...
For both Google and Mozilla, the goals of these two (or more!) groups of decision makers will not necessarily align at all times. Ideally, whatever may be going on at the ad/search/business level shouldn't impact collaboration on web standards and implementation.
With $1 billion in cash guaranteed, they could even try DuckDuckGo for a couple years and see if DuckDuckGo could grow enough to support them.
Yahoo has cash. Sure, they're not Apple in terms of liquidity, but they're not a startup either. Mozilla is - and I may need to solicit your agreement here - a Good Thing for the world.
I'm not convinced that being a Bil in the hole to Mozilla is so bad.
By contrast, there are several companies that are, according to some legal theories that may yet prove persuasive in court, in debt this much or more to governments by dint of their offshore accounting practices.
At which company do you prefer to be a shareholder? One which owes Mozilla a billion, or one which very well might owe an armed, hotheaded, unpredictable entity several billion?
Ultimately, if I'm a shareholder (and I'm not), I can forgive a billion dollars to mozilla more easily than the other Yahoo mis-steps.
I'm just saying: being indebted to a (reasonably awesome) outfit like Mozilla is less upsetting to me than being in hot (or even warm) water with the IRS.
Would Mozilla ever want to exercise this clause? I don't know - I wonder how they would react if Verizon/AOL ends up buying them, given that Netscape was bought by them early on.
My inclination is that outside of the hackernews community and those like it, most FireFox users have no idea what you're even describing.
The idea of changing the search defaults is beyond a large segment of internet users.
I guess a lot of people care about their browser being Firefox more than they care about the search engine? I once used Yahoo for a few months (also Bing and DDT). It's pretty good IMO. Not everyone would switch to Google immediately.
Every time someone started tracking people and do bulk data collection in the past century, it ended up with people being gassed, put into siberian camps, etc.
Thanks, but no thanks.
Then I grumble at how terrible yahoo search results are and go to google and search for it again...