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Why Yahoo Turned Microsoft Down
Posted by
kdawson
on Tue May 06, 2008 02:31 PM
from the you-scratch-my-back dept.
from the you-scratch-my-back dept.
quarterbuck writes "The NYTimes has up a great blog post that explains a bit of the backstory behind the Yahoo-Microsoft No-deal. While Jerry Yang did not want to sell the company, it is not likely that he could have said No to Microsoft, and explained it to shareholders, without the help of Google. The article gives reasons behind Google's tossing a lifeline to its biggest competitor, and the 'coop-etition' that has been going on between the two companies, which both emerged out of Stanford University."
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Yahoo Ends Talks With Microsoft, Embraces Google Instead 214 comments
snydeq writes with a story from InfoWorld which says that "Yahoo has ended its talks with Microsoft and is instead nearing an agreement with Google. Yahoo's purported reason for breaking off the talks? That Microsoft was only interested in purchasing Yahoo's search business, not all of the company. 'Such a transaction would not be consistent with the company's view of the converging search and display marketplaces, would leave the company without an independent search business that it views as critical to its strategic future and would not be in the best interests of Yahoo stockholders,' the company said in a statement. The deal with Google allegedly involves Yahoo's search advertising business. The move likely will draw more ire from Icahn and may in fact remain part of the elaborate poker game between the two companies. Microsoft said this alternative transaction remains on the table and did not confirm that talks between it and Yahoo have concluded." Update: 06/12 23:58 GMT by T : CWmike writes "Just hours after saying it ended talks with Microsoft, Yahoo announced that it will start running advertising from Google alongside Yahoo search results. Yahoo expects the deal, which has a 10-year term, to generate $250 million to $450 million in operating cash flow during the first 12 months."
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Jerry has an irrational fear (Score:5, Funny)
Time will tell... (Score:5, Interesting)
If stockholders come to MS for a bailout of their capital, they don't even need a hostile takeover -- it will be a willing one. And the profits Yahoo posts from Google won't reflect in their stock price for a while.
We'll see how long it takes Yahoo investors to either let the company rebound, or to bail themselves out. Yang is in an interesting position, that's all I can say.
Re:Time will tell... (Score:5, Insightful)
What about the MS Shareholders?
Buying a house that is a money hole at half off is still buying a money hole.
Strategically, MS buying Yahoo makes no sense at this point because they already have MSN and if they simply axed yahoo it will benefit Google more than MSN. If I owned MSFT at this point, I'd be breathing a sigh of relief.
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Re:Time will tell... (Score:5, Interesting)
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Re:Time will tell... (Score:5, Informative)
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The Wii's big - but stingy - audience (Score:5, Interesting)
It hasn't been all peaches and cream for the Wii.
Wii, though less technologically advanced than Microsoft's Xbox 360 or Sony's PlayStation 3, continues to outsell those machines and is now in more than 20 million homes.
So why are retailers having so much trouble selling Wii games?
Take Super Smash Bros. Brawl. It was one the most hotly anticipated video games of the year; it sold more than 1.4 million copies during the first week of its release.
But sales dropped more than 90 percent over the first four weeks.
A number of games that garnered critical acclaim in recent months, notably the cartoonish action-adventure game Zack & Wiki and the off-kilter action-adventure No More Heroes, have yielded disappointing sales.
Over the first three months of the year, only three other Wii titles broke the list of top 10 best-selling games.
Younger children, women and older consumers, who historically have not been sought by the video-game industry, have discovered video games through the Wii -- just not that many of them.
These new gamers are content with the games they have, often going no further than the Wii Sports game that comes with the machine. They don't buy new games with the fervor of a traditional gamer who is constantly seeking new stimulation.
The average Wii owner buys only 3.7 games a year, compared with 4.7 for Xbox 360 owners and 4.6 for PlayStation 3 owners.
"When you make a game like Zack & Wiki or Boogie, which turns the hard core off and doesn't reach the masses, then you're in trouble."
Wii Fit, an exercise game due next month, is expected to receive more marketing dollars than any game in Nintendo's history -- and the money will not be spent wooing young men. "Wii Fit is just not aimed at hard-core gamers. It's definitely aimed at the Oprah crowd. I bet they sell a million units a week for every pound that Oprah says she lost on it."
New Wii Games Find a Big (but Stingy) Audience [nytimes.com] [April 21, 2008]
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Re:The Wii's big - but stingy - audience (Score:5, Interesting)
My point is that the Xbox360 had 1 year head start yet the Wii has overtaken them in sheer numbers. And Nintendo makes money on every Wii. MS is only now starting to make money on the Xbox 360 and has to recover several billion dollars.
Your article also only discusses why Wii games aren't selling well. There is no real doubt that the console is selling well. Is this a serious problem for the Wii? For the Xbox and the Playstation, they targeted hardcore gamers. This player wants a wide selection and will buy more titles a year. Well, the average Wii owner is not a hardcore gamer and not as likely to buy multiple games a year. They will buy a few titles that they enjoy playing over and over. Will fewer titles keep a hardcore gamer from buying a console? Yes, considering the higher price of the Xbox 360 and PS3. Will fewer titles keep a casual gamer from buying a Wii? Not if the Wii already has the few titles that they wanted especially since it is cheaper.
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Re:Time will tell... (Score:5, Insightful)
A) Your a troll (probably true)
B) You still can't find a Wii (perhaps)
C) Your suffering from cognative dissonance for buying an over priced console, and this need to justify why it is uber1337(!!!one1!1eleven!) compared to the popular one (from your tone, I'd guess this is true, along with option A)
There is no 7th generation technology, all of the various consoles are different, but all of them are in the 7th round of the console wars, therefore ALL of them are 7th generation. The Wii bag of tricks, though, just happens not to be playing the same horsepower game that has been the rule since SNES and Genesis. So graphically it IS a glorified Gamecube, but lucky for them, that isn't the point.
I didn't know there was a correlation between what console's you buy, and what your IQ is, btw. Do you have a study to cite on that? I would argue that the people who bought PS3s would be the ones with a lower trend, since it costs more than the alternatives, but does the same things. Oddly, I bought a Wii because I'm an adult, I don't have the time to play 4000000 hour graphical frag fests anymore, and am too old to actually equate graphics with good games. Its part of the equation, but not the equation itself.
The Wii is about fun. I respect that, even if I have to check my 1337 haxx0r badge off at the door.
Back to playing Mario Kart now. Troll away.
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Re:Time will tell... (Score:5, Interesting)
They aren't buying Yahoo to take them out of the picture. They're buying Yahoo to combine market share, technology, and resources so that they can compete with Google as one team. Right now Google is eating up market share from everyone else and both Microsoft and Yahoo are losing market share. It helps neither of them to compete with each other when the big kid in the room (Google) is causing all of the problems.
This is why Yahoo share prices are declining: the market expects that the trend will continue (Yahoo losing market share to Google) therefore profitability will decrease.
Now the actions through which Microsoft utilized (buying Yahoo) may have not been the right way to go about things. It may have been a better idea for Microsoft and Yahoo to enter a strategic alliance in the short term and assess the success or lack of it later.
In the mean time, Google is perfectly happy with throwing a bone to Yahoo to keep the merger from going through. This makes their lives easier because it prevents the two from sharing technology and helps to maintain Google's lead in market share and tech.
And if I was Microsoft and the merger went through, I would axe MSN, not Yahoo. Yahoo has too much branding behind it (especially internationally) that it would be a good facade to maintain.
Now the funny thing is that I own a share of Google, so the news of the Yahoo-MS merger not going through actually helps me :).
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Re:Time will tell... (Score:5, Insightful)
Yahoo: Established and large customer base.
MSN: nth incarnation and still nobody gives a shit.
It's pretty clear here. Microsoft needs a web portal presence that someone is actually going to lose. MSN has been around since what, 1995, and has never really gained any traction. Yahoo was the early king, and Google became Supreme Search Overlord a little later in the game, but the key point here is that at no point in Microsoft's history on the Internet has it ever been in any meaningful way associated with web searching and web portals. It's pretty obvious to anyone (and that includes Ballmer) that no matter how hard Microsoft tries it will never achieve any kind of meaningful market share, meaning there's at least one major (and arguably becoming THE major) platform on which Microsoft has been utterly scooped and apparently cut out of.
Microsoft would very likely dump MSN if it could get its hands on Yahoo (not the other away around). MSN has little brand power, whereas Yahoo, while hardly the big guy, is at least a distant second, and thus still has something left to its name.
Of course Google is going to keep Yahoo alive, for the same reason that Microsoft through a lifeline to Apple in the 1990s. Sure they're competitors, but if you keep them alive, to some extent you can control them. Google sees little threat from Yahoo. It's likely to stay at its market share for the forseeable future. Yahoo backed by Microsoft $$$ is more of a threat (though not nearly the one that Microsoft envisions). Keep the company going, and at least you're dealing with the devil you know.
Of course, if the stock keeps heading south, at some point Yahoo's shareholders will probably give a hearty "fuck you" to Yang and deliver Yahoo into Microsoft's hands. But if they don't, I'd say the most obvious casualty isn't going to be Yang, but Ballmer. He's damned close to having a Eisner moment here.
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Re:Time will tell... (Score:4, Insightful)
http://chart.finance.yahoo.com/c/6m/y/yhoo
http://chart.finance.yahoo.com/c/my/y/yhoo
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Google and Yahoo should team up (Score:5, Funny)
Re:Google and Yahoo should team up (Score:5, Insightful)
The merger of the company with the vast majority of web searches with its next-closest rival would never win the approval of the Federal Trade Commission.
Google needs Yahoo! to stick around just like Microsoft needs Apple. Each company would have an effective monopoly of their respective markets if it weren't for their smaller rival, and would risk being broken up by the FTC.
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Re: (Score:3, Interesting)
Re:Google and Yahoo should team up (Score:5, Insightful)
With the current administration, they might not bat an eyelash at a Google-Yahoo merger, but the FTC doesn't break up monopolies just because they're monopolies. That's perfectly legal--the rules are in place to prevent companies from "cheating" to maintain their monopoly or leverage a monopoly to create new ones . . . like using an OS monopoly to establish an office suite monopoly, corporate e-mail monopoly, web browser monopoly and/or media player monopoly.
(as you can see, these rules have been working quite well in recent years. *rolls eyes*)
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Re:Google and Yahoo should team up (Score:4, Informative)
That's an interesting conclusion there. Nowhere in the GP's post does he define "monopoly", nowhere does the GP mention "evil", and nowhere did the GP suggest that companies other than Microsoft are immune from being evil.
He was explaining merely *having* a monopoly is legal, the illegality comes from utilizing your monopoly power anti-competitively, for which Microsoft, being the most prominent modern example of a convicted anti-competitive monopolist, is a rich mine of examples.
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Re:Google and Yahoo should team up (Score:4, Informative)
It was when they leveraged their OS monopoly to push Netscape out of the browser market that they got themselves into a legal bind. They used their market dominating power in the field of desktop operating systems to crush competition in the burgeoning market for web browsers. They didn't have a product that held a candle to a much smaller and less cash flush competitor, so rather than create a competitive product, they bolted IE into the operating system and gave it away for free thus hamstringing Netscape's ability to compete and essentially cut off any revenue stream they had to keep them afloat.
This was a flagrant violation of antitrust law. They used the power of their legal monopoly in one market to very aggressively crush competition in a market in which they were unable to compete fairly.
There is nothing finely honed about this definition of a monopoly. Microsoft was accused, tried and convicted of antitrust violations and were basically let off the hook by the Bush Administration's DoJ.
If Google tried to acquire Yahoo! or Apple tried to acquire Adobe, trust me, you'd see Microsoft screaming ANTITRUST VIOLATION so loud, we'd all go deaf. And they'd probably be justified in those claims as either of those acquisitions would really radically change the face of the software world.
There are very few companies in the world that wield a level of monopoly power even close to what Microsoft has. I can't think of a single software company that even comes close.
For all intents and purposes, Windows runs the world's computers. Like it or not. Entire industries... not just individual companies... but entire industries are tied into MS wholesale and if MS wants to change the game on these people, they either have to take it, or suffer some very serious growing pains switching to OSS alternatives or Apple alternatives. Transitions which can devastate a company. The companies that are voluntarily doing this... bravo. Smart bunch!
That is A LOT of power and the potential for abuse is huge and MS has proven they are not above abusing that power. They have been tried and convicted for it already. There is precedent, but a lack of enforcement.
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Re:Google and Yahoo should team up (Score:5, Informative)
Well, actually, they first got into trouble when the DoJ began investigating their OEM agreements in the early 1990s, and it was discovered that Microsoft was in fact penalizing, or at least threatening to penalize PC manufacturers who wanted to ship alternative operating systems by charging them much more for DOS and Windows licenses than those manufacturers who basically guaranteed the only operating system that would be shipped out on their PCs would be from Microsoft. That's the origin of the Microsoft "tax", which so far as I can tell, the DoJ never managed to get rid of.
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Re:Google and Yahoo should team up (Score:5, Funny)
You can destroy the Emperor. He has foreseen this. It is your destiny. Join me, and together we can rule the galaxy as father and son. Come with me. It is the only way.
-l
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Google == White Knight (Score:5, Interesting)
2. Google is keeping their enemies closer at this point. This is basically a white-knight move on Google's part to keep Microsoft out of their space at all costs. The question to Google is how long will it be until this kind of action starts affecting their bottom line numbers.
In a very heartless way, I'm all for the Microsoft->Yahoo acquisition. Most acquisitions fail to generate anything near the claims management makes. Microsoft would simply leave the door open for ex-Yahoo employees to startup things that would be a bigger thorn in Microsoft's side.
Death by thousands of thorns if you will pardon the pun.
It's a Stanford conspiracy! (Score:3, Funny)
That's why he orchestrated the Hoover presidency and built the linear accelerator facility, which looks like the all-seeing eye when seen from the air. Google is really just a corporate front for the Stanford band, whose shadowy aim is to take over the world from their trailer, where Leland Stanford is kept cryogenically frozen!
The world, I say!
Stock Market says no, (Score:4, Informative)
IMHO, The interesting thing is that this was such a dumb idea that even greedy investors did not seem to want it. As soon as the buyout was proposed, MSFT stock tanked well over 10%. It regained some in the weeks after, but the biggest gain occurred when it looked like the deal would go bad, and when it became clear that Balmer was going to do the damn fool thing, the stock tanked again. Not a rousing endorsement that this deal would do anything positive. On the Yahoo side, the stock briefly spiked as some investors were looking for a quick payday, and others were looking to get rid of an investment they perhaps paid too much for, but no on really seemed to think it was a good deal as even when it seemed like MSFT might raise the bid to $37, the stock never went above $29, which seemed to indicate that investors seemed to think of this as a windfall and not a long term thing. Of course, the most interesting thing, is that while MSFT stock has not recovered, yahoo has not fallen back anywhere near the january lows.
As I see it, Microsoft was simply willing to burn some money to get some experience in a field that they are flailing in, and to knock out the competition. It was not a growth strategy, simply a way to tread water. Given that MSFT is still perhpas 20% down on the year, while yahoo is somewhat in positive territory, i imagine that this act of desperation has done more harm than good.
Re: (Score:3, Interesting)
Re:good luck yang (Score:5, Funny)
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Re:good luck yang (Score:4, Insightful)
When companies merge (or are acquired) their stock prices tend to go up in the short term. So it makes a lot of sense for buyers to buy Yahoo stock right before the merger (and sell shortly after) and for the current shareholders to sell.
In other words, with Yahoo refusing to sell, the shareholders can not cash in and make a shit load of money.
Yes the stock is down right now, but by "loose money" I interpret that as "now you can't sell when the stock price immediately jumps up due to the acquisition and get filthy stinkin' richer than you already are".
The only people who would care in the slightest what happens to MS or Yahoo in the long term are people looking at long term investments. I think the only people in that camp are the top Microsoft shareholders (obviously or they wouldn't be looking to acquire them). The rest of the Yahoo shareholders just wanted to cash in and go retire on their yachts.
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