Google is the best company when it comes to making large acquisitions work out for the parent company. Just see Analytics, YouTube etc.
Yahoo is probably one of the worst if you see how many of their 100M+ acquisitions have resulted in complete failure.
Google is no genius with large acquisitions either. Motorola and Blogger come to mind immediately, but there are others too.
I think we can all agree that Yahoo has been mismanaged at least until recently. I just don't think a CEO's performance is a boolean value that depends on an undefined "any sign of failure" on a large acquisition with a 1 year time frame.
Anyone got a nice spreadsheet of who has acquired what, with the fate of the acquired unit and people? How long did they stick around? That seems like the minimum - maybe there are clever ways to add information to it.
One could argue that that the last acquisition that worked out was the acquisition of Stamped. Something tells me they were behind the new Yahoo! Weather iPhone app which is stellar.
I think Yahoo's problem with acquisitions has been that they are moderately successful initially and then drift away over time. ViaWeb, GeoCities, Musicmatch Jukebox, Konfabulator, delicious and Ludicorp (of Flickr fame) come to mind. Other than Flickr, none of the others are still around, but they weren't disappointments soon after acquisition either.
Tumblr, on the other hand, has a lot of users that are fully addicted. I can see things turning out differently.
So far, Meyer is doing what needs to be done to turn Yahoo into a first tier competitor. Who knows if she will succeed, but it's good to see them try.
When Google bought Motorola, the reasoning I read was all about patents. They still have those patents, and it might have been a good acquisition no matter the state of Motorola the company...
You can't seriously be arguing that this has gone well?
I think for Google to be assuming an aggressive position in the courts is just posturing. Can you imagine the reaction if Google did really go all at it, and there was a result of an injunction against sale of all iPhones? No, of course Google/MOT would not go for something like that, that makes no sense. As it stands though, MOT's patent portfolio is pretty damn good. They're in a good position for it. It was something they needed and now they have it.
"Just getting started" is what you hear from Nokia. That's not a good sound.
What? How can success ever not be a sign of progress? I know Silicon Valley likes to celebrate and learn from failure, but there ought to be a limit somewhere.
However, how is tumblr fighting porn? I thought they actively encouraged it. It's a big part of tumblr for sure (and big part of the value yahoo pays for).
Why didn't Yahoo just let them get desperate and buy them then? With an all-cash deal, it seems they're less interested in the team than the platform so seems they could have picked that up in a few months for significantly less.
What am I missing in this? I hope the answer is not that doing that would create enmity between Yahoo and Tumblr's investors or something like that? That would strike me as a gross violation of their fiduciary duty to their shareholders, no?
Factors like the cost of the burger, or how fresh/tasty it is, become less important.
Also, all-cash doesn't mean what you think it means. The currency used to pay for a company (cash, stock, pork bellies, whatever) is independent of the vesting schedules of the employees/founders acquired. Typically investors receive most stock/cash immediately, while employees receive some up front and the rest over a period of time that is negotiable. 3-4 years is standard. Some deals are front-loaded (more than 50% in the first half) and others are back-loaded (the reverse).
Re: the burger analogy, that also makes sense in the context of there being competition for this deal. But aside from a puff piece in TC which looks placed by sources (aka Tumblr banker Frank Quattrone), there didn't look like much competition in this case.
But nevertheless, thanks for the informative answer.
And as amusing as that might or might not be, there is also a point there.
If it's properly regulated though, you're right that there's no problem with it.
Horse meat's fine, I've had it... but it's unacceptable and potentially dangerous to have it sold as beef.
Yahoo could monkey around and try and pick it up in a "fire sale" in 12 months for $500 mil. But maybe that never happens and they still wake up tomorrow well behind in the youth and mobile demographic. I love that Yahoo, after sooo many years of indecisiveness, is being decisive and bold. Not sure if it'll pay off but these seem to be well thought out calculated risks.
But weren't there other reports that they were going to hit 15M instead? Whoops. If they had 100M revenue, they wouldn't me needing to raise more cash; their burn is far smaller.
If they intend to continue operating it (highly likely) buying while they are still with cash, all of their staff, and vibrant is quite possibly a better outcome than buying a broken company for less even only a few months later.
Disclosure: I am long Yahoo in my personal portfolio and I've led many M&A activities for Rackspace.
Would they really have turned down an offer of $700 million? $800 million? Was $1.1B really the least they'd accept?
I bet they would have accepted significantly less, rumors to the contrary.
But the billion dollar headline has its own value, I guess.
However, in this case it appears that Marco wasn't a co-founder, but rather a first employee with an equity grant. If it were for 5%, it is probably worth ~1-2% now, and so I'd reckon he will see $15M. That is a lot of money, but not enough to change the startup landscape.
> @ericf @jsnell 1) I was technically an employee, not a founder. 2) My shares were from the first funding round, before any further dilution.
How much shares would a (number 2?) employee typically get? And does it mean his shares were diluted or not?
It's not mentally reconcilable. The only way not to go crazy is if you don't think about it at all, but that's just denying the reality of you being exploited while getting few of the benefits.
Some people say, "Well, I have 'job security!'" Is "job security," the greatest corporate-serving propaganda of our generation, really worth $800,000 per year in surrendered earnings?
If you believe that price should be determined by supply and demand based on perceived value, like it mostly is in these cases, then there's no exploitation.
If you believe that price should be attributed based on Labor expended, then the Yahoo! workers are already extremely disproportionately paid relative to the average worker, so it makes no sense for them to feel exploited.
How exactly are the Yahoo! workers exploited?
I think that's between the employee and their own view of the world. If you worked at Yahoo for six years doing something, anything, and then Yahoo buys a six year old company run by a 26 year old for a billion dollars — what were you doing the past six years? Couldn't it have been you? Why not?
Every computer person employed by a company isn't generating a million dollars a year in value, but most could if they were pointed in the right direction. Even those who are generating 10x to 1000x the value of their salary aren't compensated proportionally (hence, why startups exist).
If you work on a failed project as an employee, then at least you got paid a salary during that time. As a startup founder you walk away with nothing.
That's kinda the problem these days. Failed startups have social connections making founders millionaires even when their venture was worthless. Some startups (not in the tumblr case) are essentially projects where you show the world Hey I Can Do Stuff then you get a few million dollars as a hiring bonus.
They do? Where does all that money come from and why would its owners give it away like that?
Some startups (not in the tumblr case) are essentially projects where you show the world Hey I Can Do Stuff then you get a few million dollars as a hiring bonus.
Yes. And for each, there are a bunch from which the founders walk away with very little.
Maybe instead of assuming the Yahoo! workers are all idiots who are exploited because they're unable to see that they should all be working at startups, you should try to start from the principle that they're not idiots and understand why they don't.
> but most could if they were pointed in the right direction
Also, I could make a killing investing in this here penny stock...
(Not providing a link due to high probability of NSFW content. Search for #yahoo! on Tumblr.)
Please sign this petition! [...] we can do this. We got a
girl a goddamn fluffy chicken, and took over the Internet
with the Mishapocalypse.
no chance well be google users 5eva if you do this
5eva is also a meme, although it's better known across the web (coming from a cringeworthy copy-pasted text)
In this case it's just a pointless show of anger by teenagers.
Supposedly there is a new Flickr being shown off tomorrow and hopefully Yahoo rebuilt the site from the ground up.
In a lot of ways most people are looking for what Flickr offers but refuse to use it. They want privacy, a place to back up their full-resolution smartphone photos and for a very cheap price.
Yahoo may be better maintainers than innovators, but I'd rather have seen posterous acquired by Yahoo and maintained than acquired by Twitter and killed.
For the existing team at tumblr (say anyone who has stock that is) things like this end up being a buzz kill after it settles in. Working towards something is fun and motivating. Once you get it things simply change (speaking from personal experience and observation here (also as you are pointing out).
For example, would you like to get paid now for all the work you are going to do for the next 10 years in advance and still find it as fun and challenging? If you were an athlete would you want to know in advance that you were going to win 2 medals in each of the next olympics? To me that takes the fun out of things. I think it's obvious why things are different after money changes hands.
In this situation how do you show up for work at twitter and still be creative after essentially the "game", if you want to call it that, is won? You will probably itch to get over to a new challenge. Not to be cliche but the journey is a big part of the picture.
Its obviously very hard thing to do, but I am (probably the only one in HN) rooting for Yahoo. Tired of 2-3 companies dominating the tech world. I am rooting for Marissa Mayer to succeed and give others a run for their money by doing an epic u-turn with yahoo and changing everyone's perception of what yahoo is usually associated with.
What do you think would be their best bet? My guess is it would be something less trendy since most of those end up being fads. Google's best acquisition was clearly Applied Semantics; not YouTube.
1. Yahoo would rather spend cash than stock (possibly because they anticipate Yahoo stock going up in the future). If Yahoo thinks that $1 in stock today will be worth $2 in 3 years, it might make more sense to spend cash. This is a huge gamble, of course.
2. Cash is intrinsically more valuable than stock; in other words $1 cash != $1 stock. Yahoo may feel more comfortable spending $1 Billion cash than spending $2 Billion stock.
3. The obvious, but maybe too obvious, answer: Tumblr doesn't see a future in Yahoo stock.
Cash is much more valuable than stock. Any CEO worth their salt would ALWAYS issue stock and never cash, since stock is essentially free (with some GAAP repercussions, but better that then spend cash). But it sounds like tumblr wanted cash instead of cash/stock.
It doesn't matter to the employees, they get paid out from the purchase, and then will all get YHOO retention stock options when they join.
Great deal for tumblr, terrible deal for YHOO, it's a waste of cash and as someone else pointed out last week, it's reminicient of Geocities from the dotcom days. Every employee from tumblr will start exiting, maybe after 2-3 years, and the entire thing will fall apart.
I'm disappointed in Mayer.
This is clearly untrue. Which moron CEO at the head of a newspaper anticipates anything more than a very modest increase in their stock over the next few years? Most newspapers are very much aware of their problems. Do you think a CEOs job is to bury their head in the sand and ignore all of the company's problems? Because that's the only way your statement could even come close to being true.
And 2.. as far as Yahoo.. keiferski is right.. it depends on how rapidly yahoo anticipates to grow. Obviously a stock growing at 50% is worth more than one growing at 10%.. and maybe Mayer is incredibly bullish on Yahoo, and believes Yahoo stock is worth more than what the market thinks it is.
This means increasing the stock price. So yes, I do believe that this statement is absolutely true. The CEO needs to figure out a way to increase shareholder value, whether they are Yahoo, or Washington Post, or New York Times, or Groupon. They are not supposed to sit around and maintain dividends. Whether it's breaking into new businesses, selling their current underperforming businesses, etc, that is why they are CEO, to think of new ways to make money and increase stock price. Not to sit on their laurels and collect their paycheck.
3 years is MORE than enough time for any CEO to execute a strategy that increases shareholder value. If they can't, then they should be fired.
So you're saying there were no CEOs at the end of 2008 that thought that even with all of the work they were doing to improve their company, that the recession would have net negative effect on their business. Do you really believe that?
And as this applies to Yahoo... we have no idea how bullish Mayer is on Yahoo.. maybe she thinks the company is going to grow very rapidly over the next few years, and doesnt want to give up a single share. If she is MORE bullish on Yahoo than the market, then Mayer would have considered Tumblr's demand for X number of shares unreasonable.
A CEO that can preserve value and maintain dividends is a good one. Who wouldn't want to invest in a stable and profitable company?
Cash is not always more valuable than stock. Complicated topic but I'll make one example related to this. As an investor would you rather have cash and pay taxes today on all of your gains or would you rather have stock in a reorganization where you could continue to hold and decide when and how to trigger the income?
The investors here chose cash and since I'm not part of the process I don't know why for certain, lots and lots of complicated factors at play.
Yes, they should be fired, but that's not how business works. In reality executives are self-dealing all of the time and corporations survive due to the constant small wins and losses between large groups of self-dealing people.
The CEO, as an insider, has the best knowledge of a company's financial position and estimates of the coming year. Additionally, executives can manipulate earnings and costs by a degree to achieve the outcome they want.
Issuing stock signals to investors that insiders expect the price to go down just as buybacks signal that it will go up. Issuing stock will send the stock lower whether or not the actual numbers show losses in the future.
this claim is indefensible. It depends on the valuation of the company. For example, at IPO MSFT had 25M shares outstanding @ $21, total market cap of $525M. Obviously 5M shares of MSFT stock (market value of $100M) in 1986 was worth far more than $100M of cash.
On the flip side, $100M in cash would have been worth more than $100M in Groupon stock (at the IPO valuation).
Since the price of a publicly traded stock reflects expectations about future valuations, but also has some additional risk, the cash is usually going to be valued more. "indefensible" is too strong, "not true in every single possible case" might be more accurate. Even then, your examples aren't that helpful; an example of a publicly traded company whose shares were widely thought to be underpriced would be better.
Here's the entire quote. Steven2012's claim is that cash is always more valuable than stock. He's dead wrong. If you don't believe me, maybe you'll believe Buffett on how Dexter Shoes was one of his worst deals ever.
What I had assessed as durable competitive advantage vanished within a few years," Buffett wrote on Friday. "By using Berkshire stock, I compounded this error hugely. That move made the cost to Berkshire shareholders not $400 million, but rather $3.5 billion. In essence, I gave away 1.6 percent of a wonderful business -- one now valued at $220 billion -- to buy a worthless business."
here's a more general discussion from Buffett on cash versus stock
Instead, our problem has been that we own a truly marvelous collection of businesses, which means that trading away a portion of them for something new almost never makes sense. When we issue shares in a merger, we reduce your ownership in all of our businesses -- partly-owned companies such as Coca-Cola, Gillette and American Express, and all of our terrific operating companies as well. An example from sports will illustrate the difficulty we face: For a baseball team, acquiring a player who can be expected to bat .350 is almost always a wonderful event -- except when the team must trade a .380 hitter to make the deal.
Because our roster is filled with .380 hitters, we have tried to pay cash for acquisitions, and here our record has been far better.
Maybe they wanted to put some excess cash to work.
Cash is important when you don't have it. But once you have it, it's a dead asset that produces no meaningful return. Excess cash is important as an option on future opportunity. Apparently, Yahoo found their opportunity.
Or, maybe they didn't want to revise EPS estimates down.
An extra $1B worth of $YHOO out in the marketplace would dilutes EPS by about 3% until the revenue starts flowing.
From the acquiree side:
Opportunity vs sure thing + choice of opportunities.
$1.1B in $YAHOO today will be worth something else tomorrow. Maybe more. Maybe less. Maybe $0. Cash is guaranteed to go down in value at the rate of inflation. But not more. And they get to decide on some other opportunity(ies) to go after.
They have the traffic, but it won't be easy to monetise. It might be good for Yahoo! to tackle a large challenge and let Meyer truly show them she has the moxie to turn the fledging company around.
Considering Yahoo! have a nice cache of PHP based websites, it makes sense the purchase of Tumblr is as much as a talent hire as it is an acquisition of a high-trafficked website with potential. Will be keeping an eye on this, if and when Yahoo! buy Tumblr. The deal isn't even concrete yet, but it's still highly likely given Tumblr has months left to choose a buyer and finalise a deal.
Maybe improving existing products and making new impressive products are in the plans for Mayer, but to get there she needs capable people and she needs to make Yahoo seems like a good/profitable/fun place to work at.
For a long term sinking ship like Yahoo I think major changes in direction will need some time.
For the same reason that Flickr was replaced by Instagram (and missed the entire mobile wave), Tumblr will lose traction over the next couple of years and be replaced. They'll stick around, but their traffic will fall by half in 24 to 36 months. Flickr for example has been losing traffic for two straight years.
Nothing less cool than using a Yahoo blogging site if you're a teenager. That isn't going to change soon.
From a recent-grad perspective, Yahoo fell far, far behind the rest of Big Tech on the desired employment scale. Part of this was for changeable reasons -- we've read in recent months about the larger offers and better perks that Mayer's been implementing -- but another huge reason is that Yahoo's workplace has a reputation for uninspiring people doing uninspiring work.
From all the anecdotes I've heard about Yahoo's workforce (and yes, I realize they are merely anecdotes) -- the subpar engineers should be worried, but the great engineers should be excited.
I'm definitely in the latter. I've watched Yahoo lose so many great people, especially last year. This is a good thing for Yahoo.
All we've seen so far is external projects get big money and attention. Where's the internal projects that would make working for Yahoo exciting?
Right now I'd rather be working for a company that planned to compete with Yahoo.
This is a done deal now, it's not the start of Tumblr's bidding process.
Look at Summly---how much value did they reap simply from the media coverage? They killed the software immediately, and I'm sure Yahoo! Research could've whipped up a pretty decent summarization engine at no extra cost.
Now other outlets are reporting it as a done deal when it isn't. http://www.daniellemorrill.com/2013/05/in-race-to-be-first-o...
There is room for more full-service Internet ecosystems. Microsoft has under-invested in their ecosystem. Or maybe they can't decide if they want a full-service consumer-oriented ecosystem.
No overseas-based ecosystems are strong enough to enter the US market. Yahoo is strong in some markets in Asia. If they can buy a couple more top brands and shine-up Flikr, Yahoo Finance, and some others, they will be in good shape.
Now I must probably wait until this things settles, to know is it worth investing my time or not, what changes they are going to make etc.
Is it to look relevant ? Yahoo has a ton of services, a ton of engineers and apps that could do better if they were made better. Yahoo still feels like it is 1999. Why not work on yahoo mail and make it relevant ? groups and make it relevant ? what about their ugly homepage ? I mean there is a ton of things to do, instead of buying things like Tumblr.
Marissa is cute and intelligent , but what's her strategy for Yahoo? At that rate , she'll be out in a year.
“Ballmer is rotund and intelligent, but what’s his strategy for Microsoft?” sounds just as silly.
And since when calling a person pretty qualifies as sexism? Or is it the lack of "women in IT" threads lately that makes people throw the S-word around irrelevantly?
Does buying Tumblr take away focus from their other services? I don't think Yahoo engineers working on those projects will be transfered to Tumblr.
> Yahoo still feels like it is 1999. Why not work on yahoo mail and make it relevant ?
Yahoo mail is plenty relevant. It's the 3rd largest email provider with 281 million users. And they updated it last December.
> what about their ugly homepage ?
They updated it. Also ugly != functional.
> I mean there is a ton of things to do, instead of buying things like Tumblr.
Once again, you are assuming the two are exclusive.
> Marissa is cute and intelligent , but what's her strategy for Yahoo?
What does her attractiveness have to do with anything?
Tumblr is not valuable at all for advertisers , unless you are selling porn...
What's Yahoo mobile strategy ?
What's Yahoo's cloud strategy ?
I see no strategy , only buzz ...
I'm sure plenty of engineers at Yahoo have great ideas ,it's just feel like what's really broken is Yahoo's management. Why would they pay that much for Tumblr, really ?
Huhwhat? Of course they are. Do you not have friends doing this already?
I have a number of friends that have added Tumblr, but they haven't left anything.
Plus, Tumblr IS a social network, just not built in the image of facebook. So is instagram, youtube etc.