About that yahoo deal
Post Date: Sat, 02 Feb 2008 17:14:52 -0700
I think the best thing Microsoft's board could do is find a legal way to get out with minimal losses - and the most likely thing they'll do is destroy every cent of market value they're putting into Yahoo in an ego driven attempt to merge MSN into it....
http://feeds.feedburner.com/~r/zdnet/Murphy/~3/228...
About that yahoo deal (Abstract text format)
11499
About that Yahoo deal | Paul Murphy
| ZDNet.com
@import url(http://i.zdnet.com/css/v2/base.css);
@import url(http://i.zdnet.com/css/v2/ads.css);
@import url(http://i.zdnet.com/css/v2/blog.css);
On TechRepublic:
Get your boss to let you work at home
BNET Business Network:
BNET
TechRepublic
ZDNet
ZDNet
all ZDNet
in Blogs
in News
in Downloads
in Reviews
in Whitepapers
in Dictionary
Go!
Members Log In
Newsletters
Site Assistance
RSS Feeds
Home
News & Blogs
Videos
White Papers
Downloads
Reviews
Popular
Managing L'unix
Paul Murphy
Get Managing L'unix via:
Mobile
RSS
Email Alerts
Bios:
Paul’s Bio
Pick a blog category
Apple
Applications
Database Management
Defenestration
Deploying Sun Rays
Development
Disaster avoidance
Distributions
E-voting
Enterprise Policy
General
Government
Hardware
Implementations
Infr astructure
IT Retardants
LANs and WANs
Legal
Linux
Linux Desktop OS
Linux Rx
Linux Server OS
Macworld
Media bias/incompetence
Network Administration
Network Standards/Protocols
Not Linux
Patents
Productivity
SAB or IEED
Search
Security
Software Licensing
Solaris vs. AIX
Standards
Storage
Strategy
Sun
Sun Pod
Unanswered questions
Vistabulations
What users care about
Wintel vs Lintel
~ Special Series ~
February 2nd, 2008
About that Yahoo deal
Posted by Paul Murphy @ 4:14 pm
Categories: General
Tags: Google Inc., MSN, Yahoo! Inc., Microsoft Corp., Portals, Mergers & Acquisitions, Search, Web Technology, Data Centers, Strategy
I’ve had perhaps a dozen emails over the last several days asking what I think of Microsoft’s offer to buy out Yahoo’s shareholders.
So here’s what I think - first on motivation and prospects.
Some mergers are defensive, some are driven by competitive opportunity, and others largely by management egos and investment bankers hooking for commissions. This seems to be one of the latter: Yahoo was over valued relative to its earnings potential before the deal, and Microsoft’s 62% premium over the penultimate closing price seems absurdly over the top.
What I imagine (note “imagine” not “know”) happened is that the change in Bill Gate’s role at Microsoft gave some of the other senior players the opportunity to commit their supporters by ramming through a deal last researched sometime in September or October of 2007 - i.e. before what I think of as the “Soros dip” hit the market.
Next, on execution: I don’t think Microsoft management can improve on Yahoo management - and I don’t see any serious synergies with MSN either. Basically, Microsoft has two choices here: let existing management run the company in competition with MSN and Google, or try to make something new by merging Yahoo and MSN. Either way it’s a guaranteed loser: if they don’t try for merger synergies internal opposition will coalesce around that premium and the people behind the deal will eventually lose. If, however, they do try to create synergies from essentially nothing -the cost of running MSN is trivial relative to that $26 billion cash premium, I think the people involved will fight each other into the ground - pretty much the way the Compaq and HP people fought each other and in that process destroyed HP’s entire pre-merger market value.
And, finally, on the relationship to Google. A lot of people are playing this as some kind of Microsoft response to google’s growing market control. If so, it’s a very uninformed and unthought through response.
Google is tremendously vulnerable - but not to Yahoo or MSN because its customer model is very different from theirs. People use MSN because it’s a link to Microsoft, and they originally used Yahoo instead of Altavista because Yahoo offered classification based search instead of text search. Since then google blew Altavista away by offering a superior text search interface and Yahoo moved toward portal services and away from its original classification based search. As a result Yahoo’s revenues are reasonably predictable - and it’s a $20 share that’s probably worth around $18 on the basis of its expected revenue flows.
Google, on the other hand, is almost totally dependent on its search engine’s popularity - the data center stuff they’re building isn’t ready yet and certainly hasn’t attracted its intended markets. Thus the reason I call it a $20 share when it’s selling at well over $500 is just that I’m discounting its future revenues to account for the risk that someone starts up a better search engine - and simply takes away google’s eyeballs before their time share services can take over as a revenue driver.
It wouldn’t be hard - Sun’s new ROCK gear will be available soon and offer the ability to handle half a million concurrent search requests on two billion documents - in memory and far faster than google’s Linux grids can do it. More importantly, things that are hard for google to do precisely because of its distributed infrastructure -things like using reader credibility to assess search result credibility- will be easy to do on Rock. Basically google is a ballooning bet on the one thing we know never happens in this industry: stability - and because Yahoo isn’t, this is either the dumbest anti-google strategy ever devised, or not an anti-google strategy at all.
So, bottom line? I think the best thing Microsoft’s board could do is find a legal way to get out with minimal losses - and the most likely thing they’ll do is destroy every cent of market value they’re putting into Yahoo in an ego driven attempt to merge MSN into it.
Paul Murphy (a pseudonym) is an IT consultant specializing in Unix and related technologies. See his full profile and disclosure of his industry affiliations.
« Previous postNext post »
Talkback
Most Recent of 8 Talkback(s)
Thread View
Flat View
Warning: paranoid opinion involved here
What I think is that some senior people at SocGen knew what Kerviel was doing at least six months ago - and that if they'd simply traded out his position over a period of a few days they'd have lost v... (Read the rest)
Posted by: murph_z Posted on: 02/04/08
You are currently:
Logged In as: a Guest | Login | Terms of Use
I agree
John L. Ries | 02/02/08
RE: About+that+Yahoo+deal
josephrot | 02/03/08
What about the ISP AT&T/Yahoo?
pfyearwood | 02/03/08
Affect ATT/Yahoo DSL service
josephrot | 02/03/08
No effect - this is just co-branding for an AT&T service (NT)
murph_z | 02/03/08
Yahoo! is a content company...
Anton Philidor | 02/03/08
"Soros dip"? 'splain please
dstrom | 02/04/08
Warning: paranoid opinion involved here
murph_z | 02/04/08
What do you think?
Subject (max length: 75):
Reply:
No Trackbacks Yet
The URI to TrackBack this entry is:
http://blogs.zdnet.com/Murphy/wp-trackback.php?p=1059
SponsoredWhite Papers, Webcasts, and Downloads
Network Security Checklist Cisco Systems
UltraDNS Services: DNS Security and Network Reliability NeuStar
Live Webcast: Visibility: The Key to Maximizing Network Resources Blue Coat Systems
Recent Entries
Reviewing Windows 7
An interpretation of the cloud
Storage networks
IT’s horsedrawn horseless carriages
Lessons from the Death Map
Top Rated
Commitment to standards+2 votesIE chauvinism creates hidden costs+1 votePolitics, Tech, ET, and Global Warming+1 voteZFS vs. Apple X-RAID+1 vote
Follow ZDNet on Twitter
Archives
January 2009
December 2008
November 2008
October 2008
September 2008
August 2008
All "Paul Murphy" talkbacks
ZDNet Blogs
A Developer's View
All About Microsoft
The Apple Core
Between the Lines
BriefingsDirect
Collaboration 2.0
Community, Incorporated
CRM 2.0: The Conversation
Dev Connection
Digital Cameras
Ed Bott's Microsoft Report
Emerging Tech
Enterprise Alley
Enterprise Web 2.0
Feeds
Forrester Research
Googling Google
GreenTech Pastures
Hardware 2.0
Home Theater
iGeneration
Irregular Enterprise
IT Facts
The IT Grind
IT Project Failures
Laptops & Desktops
Lawgarithms
Linux and Open Source
Managing L'unix
The Mobile Gadgeteer
On Sustainability
Rational Rants
The Semantic Web
Service Oriented
Smartphones and Cell Phones
Software & Services Safari
Software as Services
SOHO Networking
Storage Bits
Team Think
Tech Broiler
Tom Foremski: IMHO
The ToyBox
The Universal Desktop
Virtually Speaking
The Web Life
ZDNet Education
ZDNet Government
ZDNet Healthcare
Zero Day
SponsoredWhite Papers, Webcasts, and Downloads
Web 2.0 for the Enterprise: Setting the Foundation for Success Oracle
Increase IT Efficiency through Virtual Datacenter Automation VMware
The Social Enterprise: Using Social Enterprise Applications to Enable the Next Wave of Knowledge Worker Productivity Oracle
Gifts for Geeks
Find a gift for your favorite geek in the TechRepublic 2008 Geek Gift Guide.
Flip Mino
Amazon Kindle
Roku Netflix Player
Acer Aspire One
FPS Gaming Vest
Blogs
All About Microsoft
The Apple Core
Between The Lines
Googling Google
Digital Cameras
Hardware 2.0
Laptops and Desktops
SOHO Networking
Storage Bits
Zero Day
Product Reviews
Home Theater
PCs, Software and Peripherals
Smartphone and Cell Phones
Digital Cameras
Videos
CIO Vision Series
At The Whiteboard
News Video
White Papers and Webcasts
Business Management
Career Development
Infrastructure Management
ManageMobile - Wireless Communications
Network Security
Webcasts
Downloads
Internet Tools and Utilities
Spyware Removers
System Optimizers and Diagnostics
System Utilities
More
2008 Holiday Gift Guide
Photo Galleries
Latest News & Blogs
Podcasts
Site Index
ZDNet
ZDNet News & Blogs
Hardware,
IT Management,
Networking,
Operating Systems,
Photo Galleries,
Security,
Software,
Web Technology,
All News,
Dev Connection,
Emerging Technology,
Enterprise Alley,
Googling Google,
GreenTech Pastures,
IT Project Failures,
Linux and Open Source,
Managing Linux,
The Social Web,
Storage Bits,
Virtually Speaking,
The Web Life,
Podcasts
Product Reviews
A/V Receivers,
Cell Phones & Accessories,
Desktop Monitors,
Desktops,
Digital Cameras,
Digital Camcorders,
Flat-panel TVs,
Laptops,
Portable Video Players (PVPs),
PDAs,
Smartphones,
Software,
Storage
Product Blogs
The Toybox,
Digital Cameras,
Laptops and Desktops,
Mobile Gadgeteer,
SOHO Networking,
Smartphones and Cell Phones,
Home Theater
White Papers & Webcasts
Cost Control / Risk Management,
Customer Support Services,
IT HR / Staffing / Training,
Resources Management,
Strategic Planning,
Webcasts
Downloads
Antivirus Software,
File and Disk Management Utilities,
Image Editing,
Privacy Software,
Shell and Desktop Management Enhancements
Site Help & Feedback
Site Map
Popular on CBS sites: CES | Spore | iPhone 3G | Katy Perry | Antivirus Software | GPS | Recipes | Macworld | NFL
BNET | CBS College Sports | CBS Radio | CBS.com | CBSNews.com | CBSSports.com | CHOW | CNET | CNET Content Solutions | GameSpot | International | Last.fm | MaxPreps | Metacritic.com | Moblogic | MP3.com | mySimon | NCAA | Search.com | Shopper.com | TechRepublic | The Insider | TV.com | UrbanBaby.com | UWIRE | Wallstrip | ZDNet
About CBS Interactive |
Jobs |
Advertise
© 2009 CBS Interactive Inc. All rights reserved. |
Privacy Policy |
Terms of Use
0
|
