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Why Yahoo Turned Microsoft Down 161

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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Why Yahoo Turned Microsoft Down

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  • by Nimey ( 114278 ) on Tuesday May 06, 2008 @03:35PM (#23315888) Homepage Journal
    of chairs.
    • by Anonymous Coward
      Jerry's sentiment was that he mismanaged Yahoo into it's present situation, and he would prefer to mismanage Yahoo out of it all by himself.
    • Re: (Score:3, Funny)

      by Cyclops ( 1852 )
      Don't worry Jerry, all the chairs have been occupied in Portugal ;)
  • Time will tell... (Score:5, Interesting)

    by HerculesMO ( 693085 ) on Tuesday May 06, 2008 @03:43PM (#23315994)
    If Yahoo's stock price continues to decline, MS has intelligently kept their offer "on the table".

    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.
    • by vertinox ( 846076 ) on Tuesday May 06, 2008 @03:51PM (#23316098)
      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.

      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.
      • Re:Time will tell... (Score:5, Interesting)

        by lilfields ( 961485 ) on Tuesday May 06, 2008 @04:06PM (#23316346) Homepage
        Why would Microsoft axe Yahoo? They would just put them on the same search index and advertising algorithm. Live actually has a good index...I think Microsoft could wait 2 years and they could get Yahoo at half the price, especially the way Jerry Yang is driving it into the ground. He makes Terry Semel look like a genius for crying outloud; Yang needs to let go, he's getting a steal. Microsoft, is good with money pits, they turned the Xbox franchise into a profitable entity and forced Sony to take massive losses in their PS3.
        • Re:Time will tell... (Score:5, Informative)

          by tb3 ( 313150 ) on Tuesday May 06, 2008 @04:52PM (#23317028) Homepage
          The XBox is not yet 'profitable'. They now have a positive cash flow, meaning they are taking in more money than they are spending, but they have a long way to go to pay back the initial $6 billion investment.
          • Also while MS and Sony focused so much on each other, Nintendo slipped in. The Wii already has more marketshare than the Xbox and is profitable.
            • by westlake ( 615356 ) on Tuesday May 06, 2008 @07:06PM (#23318558)
              Nintendo slipped in. The Wii already has more marketshare than the Xbox and is profitable.

              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 [] [April 21, 2008]

              • by UnknowingFool ( 672806 ) on Tuesday May 06, 2008 @07:28PM (#23318766)

                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.

                • 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.

                  It can become a problem for Nintendo.

                  The XBox and PS3 have larger ambitions than console gaming.

                  That is why the PS3 has the integrated Blu Ray drive and the XBox a mature online component.

                  Why the Windows PC, the XBox 360 and products like Windows Home Server are being intimately woven together.

                  SONY and Microsoft expect to be there when the home

              • I don't know. I have Call of Duty and Williams Pinball for the Wii. I am also eagerly waiting NHL 2008. My kids have about 10 games. Not bad for about 4 months with the system.
              • Brawl sucks online and the wheel for Mario cart is crap. Most of the Nintendo games out have flaws that drag down sales through word of mouth. Personally I'm waiting for a second generation Wii so all the games for it have cut their teeth already on what is fun and what isn't.
              • The article you cite concentrates on the US market, but all three consoles (and many, but not all games for them) are sold internationally, and Wii games have been steady sellers in Europe and Japan (PS3 games also sell well in Japan, but aren't anything like as popular elsewhere).

                It's quite frequent for games companies to target a specific region or country with certain titles that end up being extremely profitable despite not being designed to appeal to people in other regions. There are for example many
              • by hkmwbz ( 531650 )
                That's odd. Capcom said that they were pleased with the Zack&Wiki sales. There's even rumors of a sequel. Also, Wii Fit, Mario Kart, etc. are selling like crazy. Wii is insanely popular.
        • Re: (Score:3, Interesting)

          by icknay ( 96963 )
          Microsoft wanted Yahoo in order to force-push Silverlight in front of all those email users. HTML and javascript are terrible for Microsoft, since they were cross platform (witness Microsoft ignoring IE with its terrible implementation all those years, hoping HTML would just die off).

          Microsoft wants to push their proprietary Silverlight "web" to retake the glorious control they had pre-internet vs. today's picture with some degree of cross platform support and EEK competition!

          Flash has quite a lead, but Mic
      • Re:Time will tell... (Score:5, Interesting)

        by tknd ( 979052 ) on Tuesday May 06, 2008 @04:44PM (#23316930)

        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.

        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 :).

        • by MightyMartian ( 840721 ) on Tuesday May 06, 2008 @05:43PM (#23317714) Journal
          Or, to put it concisely:

          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.
        • by rbanffy ( 584143 )
          'cause you know two bricks float better than one.
      • MS buying Yahoo makes no sense at this point because they already have MSN
        You're right, in that they do indubitably have MSN.

        You're wrong, because MSN is an absolute pile of leprotic poo.
      • by gosand ( 234100 )
        Buying a house that is a money hole at half off is still buying a money hole.

        Yep, just ask Bank of America, who recently bought Countrywide.

    • With the day almost over Yahoo is up for the day, after a drop yesterday.

      Personally MSFT would have been hard pressed to do anything with yahoo. they couldn't improve it with ruining what's left of yahoo, and yahoo had no real alue for MSFT except customers.

      Then again MSFT isn't above buying customers instead of developing compelling products.
    • by Anonymous Coward on Tuesday May 06, 2008 @03:55PM (#23316180)
      You're completely missing the point. Yahoo is still way up since the announcement of the offer months ago and has essentially done as well as any other tech company since it's inception.
      • Re: (Score:2, Funny)

        by jollyplex ( 865406 )
        I always trust to deliver a fair and balanced report on the strength of Yahoo stock.
    • If Yahoo's stock price continues to decline, MS has intelligently kept their offer "on the table".

      When you posted, and currently, YHOO is up $1.35 for the day to $25.70 or so.

      As another poster noted, that is well above the $18 or so YHOO started at before the Microsoft offer.

      YHOO is doing just fine...
    • Re: (Score:3, Insightful)

      by Aram Fingal ( 576822 )

      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.

      I don't think that's true. Stock prices usually respond in anticipation of an event. Investors know that this is going to happen so they have already factored it into their willingness to buy or sell. Later, when the event actually happens, the response in share price will be a correction to

    • by rbanffy ( 584143 )
      "they don't even need a hostile takeover -- it will be a willing one"

      A hostile takeover always implies someone willingly sells their stock to someone else. If the hostile takeover is obtained at gunpoint, it's not called a hostile takeover.
  • by elrous0 ( 869638 ) * on Tuesday May 06, 2008 @03:46PM (#23316026)
    Only together can they defeat Microsoft, and rule the world as a monopoly so strong that even God will fall to his knees before them!
    • by cwgmpls ( 853876 ) on Tuesday May 06, 2008 @03:50PM (#23316078) Journal

      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.

      • Re: (Score:3, Interesting)

        And at least now you can always choose search engine #2 to avoid most of the spam search responses, which usually target search engine #1, but only as long as #2 is itself a good search engine.
      • by Orange Crush ( 934731 ) * on Tuesday May 06, 2008 @04:08PM (#23316372)

        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*)

    • by Luyseyal ( 3154 ) <> on Tuesday May 06, 2008 @03:52PM (#23316104) Homepage
      Were you thinking of:

      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.

    • I don't think even God will kneel before the MS Empire! I think it will be more "Here have a seat!".
  • Giving a direct competitor a life line as to avoid the Goliath the merger would become while meanwhile stagnating the competitor.
    Wow, I don't think I'd want to be in THAT risk assessment meeting. Then again, they did it for and apparently it's working there too.

    Competition leads to innovation
  • by mpapet ( 761907 ) on Tuesday May 06, 2008 @03:53PM (#23316126) Homepage
    1. Microsoft probably can and will figure out a way to eventually stack the board of in directors in their favor at Yahoo. Microsoft has time, Yahoo doesn't.

    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.
    • I think the bigger threat, as you mention, the greater unknown: Yahoo employees potentially leaving to startup a new company/entity. They could take all the knowledge and lessons of making Yahoo #2 and what could have made them better. There'd certainly be more money, despite the risk, in doing this than working to MS or Google.
  • by engineerErrant ( 759650 ) on Tuesday May 06, 2008 @03:57PM (#23316222)
    That's really the crux of all of this. The fact that the founders of both went to Stanford is hard proof of what I've always said: they are all part of a secret railroad monopoly plan hatched by Leland Stanford in the 1800s.

    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!
    • Re: (Score:3, Funny)

      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!
      frozen inside the emptied rack of a sun E10k, right ???

      * for those who didn't get the joke, sun microsystems took it's name from the acronym Stanford University Network.
  • by fermion ( 181285 ) on Tuesday May 06, 2008 @04:53PM (#23317054) Homepage Journal
    If we believe the stock market, and assumes that, at least in the mid term, reflects the prospect of future profit, then the reason Yahoo turned down the offer was because it was a dumb thing to do. Though it would have meant short term gains for Yahoo investors, the MSFT stock price indicates that it would have a dumb thing to do, at least in the mid term. Though a executive might have the requirement to maximize profits for investors, one can hardly argue that an executive should sell simply to maximize short term gains when a company still has long term profits. At the very least one can argue that a firm has a duty to the employees that generate a long term profit and not discard these employees simply to gain an immediate pay day for a few greedy investors.

    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.

    • Your belief in stock market valuations meaning something at all in the real world is quite interesting.
  • by kylben ( 1008989 ) on Tuesday May 06, 2008 @05:32PM (#23317552) Homepage be in the (hopefully chairless) room when Ballmer heard this news. The look on his face must have been priceless. Google is playing Chess, while Ballmer can barely handle checkers.
    • Google is playing Chess, while Ballmer can barely handle checkers.

      . in the land of slashdot i didn't expect to see an apt and fitting analogy. Google is capable of developing new new and (sometimes) original products by a variety of means (in house development, OSS community development, buy out). Microsoft seems to have just one move, purchase a company and assimilate their product. Microsoft and Google are both monopolies, the key difference being is that Google became a monopoly by offering a superior

  • by mlwmohawk ( 801821 ) on Tuesday May 06, 2008 @05:36PM (#23317622)
    All the analysis I've read is just nonsense. Google knows something that Microsoft and business analysts don't have a clue about.

    A thriving market place makes a lot of money for everyone, yourself included. You have a vested interest in maintaining the market place.

    The loss of a major fair playing competitor and the introduction of a stronger destruction driven monopolist makes it harder for everyone, including Google, to make money.

    Google wants yahoo in place. They make money from Yahoo. Yahoo wants google in place, they make money with google. Where their businesses do not conflict, they work together. Both Yahoo and Google aren't fighting to destroy one another, they are in business to make money. It is friendly and profitable competition. They way it should be. The that capitalism works best.

    Microsoft on the other hand can not compete on a fair market. They never have and never will be able. They must capitalize on their illegally maintained windows and office monopoly to destroy competition and destroy the marketplace leaving only enough business for themselves.

    Google is a strong competitor, I don't "trust" them per se'. for The time being, however, they've shown that they understand ethics and the phrase "a rising tide lifts all boats."
    • I think that both Yahoo and Google view each other as competitors, but they want to succeed by being better. MS, as far as I can remember, has never wanted to succeed but just wanted to win against any competition. To win, their modus operandi has been to undermine the competition. The problem with that philosophy is that once the competition disappeared, MS stopped trying. For example, IE. After it won the Browser Wars I, it stopped all development. It wasn't until Firefox started taking marketshare,
      • The chief difference is simple. Yahoo and Google outcompeted Microsoft, and this despite every single copy of Windows for the last thirteen years defaulting to Microsoft didn't get it then and it really doesn't get it now. Yeah, it has a Google-clone in, but it's done nothing to get market penetration.

        Gates can go on until the end of time on how Microsoft is going to go its own way, how it's got a strategy blah blah blah, but it's all just soothing words for the shareholders, who within
  • No wonder Ballmer hates Google. Stanford 2, Harvard 0. Wonder how far the chair flew this time. Maybe Ballmer should talk to the X Prize peole.
  • After fending off months of threats by Microsoft Corp., Yahoo Inc.'s directors still will have to fight for their jobs as the company's own irate shareholders plot a mutiny.

    Eric Jackson, president of Ironfire Capital, is trying to recruit an alternate slate of directors to present at Yahoo's annual meeting on July 3."We are hoping to turn that (meeting) into 'Independence Day' for Yahoo's shareholders."

    Yahoo's board wanted $37 per share -- a price that the company's stock hasn't reached in more than two y

  • Both companies have lots of angry shareholders according to the news.

Do not underestimate the value of print statements for debugging.