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February 13, 2008
Microsoft/Yahoo: A Brief Rant
I'll use this column as a jumping-off point, but here is a mini-rant I've been meaning to get off my chest about some of the anti-deal arguments being trotted out during the Microsoft/Yahoo takeover tussle.
Some of the more popular arguments -- mismatching corporate cultures, Yahoo's second chance, and fondness for founders --- being trotted about the Microsoft/Yahoo deal piss me off. They are, in short, hopelessly wishy-washy and soft-headed. They want us to give CEO Jerry Yang more time at Yahoo because they think he has "passion", because the two companies don't like each other, and because a turnaround would be a great yarn.
C'mon. The writers' strike is over, so save the amateur feel-good scripts and false drama. This is now about Wall Street and investors. Yang isn't making shareholders money, plain and simple, and his company hasn't made them money for four years. There seems little prospect that will change in the near term, with his company mostly going through a messy mid-life crisis trying to figure out whether it's in search, content, ad serving, kite-surf sites, or something else.
While a Microsoft/Yahoo combination isn't going to transform online markets, it is also obvious that without radical change a standalone Yahoo isn't going to either. So let's just get on with giving investors an exit and call it a day.
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But that's a different question. From a shareholder standpoint taking a 61% premium today is far more defensible than waiting out potential future gains from a maybe resurgent Yahoo.
No-one is saying you have to hang on be a Microsoft shareholder, post-deal. After all, as a wiser man than me once said, stock is meant to be sold, not bought.
Not making shareholders any money? They're
slower than Google for sure, but they beat
the pants off MSN any time in revenue and
profit (and prospects, I dare say). Note
that I am not counting the Windows/Office
monopoly that has been subsidizing Microsoft's
financials for the past couple of decades.
And here's YHOO compared to MSFT in the past
6 years (not counting anything in 2008):
http://finance.google.com/finance?chdnp=0&chdd=1&chds=1&chdv=1&chvs=Linear&chdeh=1&chfdeh=0&chdet=1199480400000&chddm=592752&cmpto=NASDAQ:MSFT&q=NASDAQ:YHOO
YHOO: +145.08%
MSFT: -000.20%
There are many ways of making shareholders
money but converting to MSFT shares or MSN
management are certainly not among them.
This is not about Wall Street or investors
or spreadsheets. You have to understand and
be a part of the Internet to be able to
survive on the Internet. Amazon, Google, Ebay,
and yes, Yahoo, have this in their DNA.
Microsoft (the company as a whole, individual
employees or groups notwithstanding) has never
understood the Internet or the Silicon Valley.
And they're never going to start ...
There was an old Paul Graham piece about how
Microsoft is dead. He can be pompous but that
piece actually rang true. Microsoft is dead
as far as the Internet is concerned. Yahoo
does not deserve to be handed over to the
undertaker.
sorry, wrong link, here you go:
http://finance.google.com/finance?chdnp=0&chdd=1&chd
s=1&chdv=1&chvs=Linear&chdeh=1&chfdeh=0&
chdet=1199480400000&chddm=592752&cmpto=NASDAQ:MSFT&a
mp;q=NASDAQ:YHOO
and a tinyurl version:
http://tinyurl.com/2lvoev
And going beyond the bust, here's YHOO vs MSFT
for the entire history of YHOO from its IPO in '96
until the end of 2007:
http://finance.google.com/finance?chdnp=0&chdd=1&chds=1&chdv=1&chvs=Linear&chdeh=1&chfdeh=0&chdet=1199480400000&chddm=1176194&cmpto=NASDAQ:MSFT&q=NASDAQ:YHOO
YHOO: +1584.35%
MSFT: +0427.02%
MSFT has flatlined and turned into
a dividend/buy-back stock. I'm not quite sure
anyone holding MSFT is expecting actual growth
in share price or market cap. Why does Wall
Street cheer Internet acquisitions by a
company with a decade's track record of
doing diddly-squat with these purchases
(if not driving them into the ground)?
Look at Hotmail for a good example of
an acquisition that had to wait until
Gmail before they actually got off their
butts to actually do something interesting
in terms of storage or user interface.
Until then, the highlights of Hotmail
were more spam, more banner ads, crappier
UI and a transition to NT from FreeBSD.
Redmond funny farm is the right way to put it.
YHOO on its own has some chance of going up,
even if they'll have to fight really hard.
Converted to MSFT, it's a guarantee that
you'll just have more flatlines and a miserable
three-legged egg-and-spoon race.
Hello? Yang is not making shareholders any money and has not for four years?
Have you looked at the results from the Redmond funny farm lately? The crew of Ballmer, Alchin, et al. has a substantially longer record of pulverizing shareholder funding.
Have you looked at the fundamental numbers on Xbox? Have you considered that Vista will probably not earn anything when all is said and done after six years of development? Vista is a robust failure, no matter what the Redmond bloatmeisters put out in PR. WinMobile has been a disaster - fewer users after six years than iPhone after nine months! Do you remember that ass Ballmer laughing about it a year ago. Go to Youtube and search on Ballmer and iPhone if you want a sick joke. And, that utterly silly joke, Zune?
These guys are capable of running Yahoo? Without the base monopoly profits from Win and Office, Ballmer, Alchin, et al. would have been forced out a decade ago.
MDFT Management is incapable of running a corner candy store.
MSFT is a company unique in American business history: almost all of its recent projects are failures. Can you say it: GM.