i know, i’m probably going to be handed my head on a platter for something like that but i really can’t help thinking how stupid this marriage would be. and at the price!!! eek! the basic buffett sentence, “I am willing to pay $31 for each share of Yahoo!, valuing Yahoo! at $44 billion” must not have been written out before making the offer. i mean, seriously…$44 billion…for what?
for a company that with years and years of a head start on the internet but is lagging google by huge margins?
cute quote illustrating what i’m talking about:
“Our lives, our businesses, and even our society have been progressively transformed by the Web, and Yahoo! has played a pioneering role by building compelling, high-scale services and infrastructure,” said Ray Ozzie, chief software architect at Microsoft.
there, he said it. they pioneered what was possible…and they were lucky. they were first on the scene and were able to stake a claim that made yahoo! too rich to sink post-bubble. that didnt’ mean that management had a single clue about what they were doing.
same goes for msft. it’s just losing more and more.
here’s an awesome pic from secrete diary of steve jobs:
what kind of company is msft anyway? are they a software maker? are they OS architects? are they a hardware/gaming company? are they an internet company? (assets: live.com, msn.com, hotmail.com–all of which are lagging…next thing they’ll buy is probably friendster to add to their “once awesome but now loser” list of “assets”). they’re not the best at any one thing any more…you’d think with all the dough this company brings in someone at the top might know what’s going on. hopefully the bill and melinda gates foundation isn’t mostly funded by a stock gift since the behemoth of a foundation could quickly dwindle if msft insists on over paying for companies…which it’s been doing a lot lately (think, “facebook“)
both of these companies are amazing examples of creative destruction. i just wouldn’t want to be a shareholder for either company–meaning, i would have sold every single share of yahoo! i owned today, banking on the deal taking over a year to get regulatory approval, new price tender, etc…what a great opportunity to get out of a pickle, dead-end stock. msft basically offered everyone who was long yahoo! a quick out. talk about a gift. not something that will happen very often.
here’s more from msft’s value proposition:
“The combined assets and strong services focus of these two companies will enable us to achieve scale economics while reaching R&D critical mass to deliver innovation breakthroughs,” said Kevin Johnson, president of the Platforms & Services Division of Microsoft. “The industry will be well served by having more than one strong player, offering more value and real choice to advertisers, publishers and consumers.”
at least some people agree with me: 
Vikas Agarwa — my favorite quote from vikas was
What happens when a loser marries another loser? We get a winner? No, we get a loser squared.
(empahsis mine) i couldn’t agree more. losers squared…hahahaha. i’m lovin’ it!
from bloomberg this morning (update 02.02.08)
“This is a stupid deal, and I’m not happy,” said Jane Snorek, who helps manage more than $70 billion in assets at First American Funds in Minneapolis. She said the firm began selling much of its Microsoft position yesterday, when the stock dropped 6.6 percent, the most since April 2006. “I’m expecting slow market-share erosion from Microsoft and Yahoo.”
to be balanced, some people thought yahoo was cheap just two days ago…hopefully now that the price is up, he’s changed his mind…
anyway, what’s everyone else thinking? i’m trying to resist the temptation to short the hell out of both companies. i see a dark future ahead and the internal workings of the companies need to really make a turn around if we’re going to see msft and yahoo! in 2015…
2 responses so far ↓
1 Mr K // Feb 1, 2008 at 7:42 pm
Alright, first - GREAT post. I have been thinking about how to write about this today, but you beat me to it.
I would say Buying OR Shorting either company right now is a bad move. Am I wrong? Of course.
It will go one way or the other, but I can’t tell right now.
Microsoft and Yahoo. Neither of them are going anywhere. There is just too much money behind both right now. And sure, they can go into a gloomy place for a while, but they have enough money to come up with something at some point (think Nintendo).
Think about one thing: if someone handed you $1,000,000 and told you the only thing you could do is start a business. Do you think it would be successful? What if they offered $1,000,000,000? or $100,000,000,000? Think you would make it through the next 5-10 years?
I don’t think it is a good move at all. But “Microhoo?” (hehe) won’t be gone in 2015.
2 messels // Feb 2, 2008 at 10:56 am
the burn rate (i.e rate of cash consumption) is super high, esp for msft.
if “the company” is going to make it another 7 years out, i don’t think it will be *a* company.
msft needs to spin off a few of its assets, create a network of subsidiaries that work somewhat together but are more focused on the new company specific core, whether that be: search, email, gaming, OS.
i’m only kidding to some extent as i would just take a short position and let it dwindle to zero value just for the satisfaction of shorting msft-yhoo. but that’s silly…hence me kidding.
from what i understand–and it could be wrong–msft has a track record of mimicking other people’s technology. the best thing gates ever came up w/ was DOS. he copied jobs’ UI when making windows. i think it’s a track record of never innovating and simply copying is why msft is such a laggard company.
msft is a **far** cry from nintendo.
btw, who’s handing who money in this deal? there’s no new money to make a business w/. ballmer has to figure out how to get yahoo to work with msft. talk about a royal nightmare! there’s not going to be any new company…
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