Microsoft offers $44.6B for Yahoo

[DanS]

Not so. But even if true, web apps is entirely related to Microsoft's monopoly.

[Asher]

Originally posted by DanS
Not so. But even if true, web apps is entirely related to Microsoft's monopoly.

Since when did MS have a monopoly on web apps?

Microsoft and Yahoo's webapps are both distant to Google. There's no monopoly here or any worry about that by non-GOOG owners.

[DanS]

Web apps are an adjacent market to an existing Microsoft monopoly.

[Asher]

Originally posted by DanS
Web apps are an adjacent market to an existing Microsoft monopoly.

Web applications do not compete or are adjacent markets to operating systems.

You are confusing operating systems with Office productivity suites.

And as far as I know, Office is not a legal monopoly and even then, I'd argue Office and Gmail/Hotmail are fundamentally different markets.

[snoopy369]

Regardless of MS's actual practice, surely you're not so stupid/naive as to believe that it is not theoretically possible for an OS manufacturer to exert undue influence over internet activities

[Asher]

Originally posted by snoopy369
Regardless of MS's actual practice, surely you're not so stupid/naive as to believe that it is not theoretically possible for an OS manufacturer to exert undue influence over internet activities

I don't think this is the case, I don't think this has occurred, I don't think this is legally provable, and I certainly know this isn't a legal issue in the Yahoo acquisition.

[Dinner]

For all of Dan's talk about this merger being useless I think it is telling how much Google is floundering about trying to block the deal. It seems Google really doesn't want a larger competitor with Microsoft's deep pockets.

http://www.latimes.com/business/la-fi-yahoo5feb05,0,3105416.story

[snoopy369]

I don't see any evidence of an unreasonably substantial push by Google there... it's just good business sense to at least make an effort to keep your two biggest rivals from merging, but I don't see any evidence of an extreme effort there.

[Asher]

Dan, here you go:

http://www.reportonbusiness.com/servlet/story/RTGAM.20080205.wrdecloet05/BNStory/robColumnsBlogs/home

The real reason Google's feeling queasy

DEREK DeCLOET

ddecloet@globeandmail.com

February 5, 2008 at 6:17 AM EST

Google's corporate motto, like the website itself, is a model of simplicity, just three words long: "Don't be evil." If Googlers were more honest, they'd add three more: "Instead, be paranoid."

The inhabitants of Silicon Valley barely had time to recover from the shock of Microsoft's $45-billion (U.S.) play for Yahoo before Google began trying to sabotage the deal. Please understand, though, that Google's concerns have nothing to do with its fear of losing dominance in online advertising. Nope: It's all about mom and apple pie and preserving the great American spirit of innovation.

"The openness of the Internet is what made Google - and Yahoo - possible ... so Microsoft's hostile bid for Yahoo raises troubling questions," begins the statement by Google's chief legal officer. "Could Microsoft now attempt to exert the same sort of inappropriate and illegal influence over the Internet that it did with the PC? ... Microsoft has frequently sought to establish proprietary monopolies ... [a] legacy of serious legal and regulatory offences ... unfairly limit the ability of consumers ... ." You get the idea. (By the way, did you know that Microsoft chief executive officer Steve Ballmer eats fried kitten for lunch? It's true. Ask Google.)

This is bizarre. Companies that boast 75-per-cent market share, as Google does in Internet search and advertising, don't usually make such a stink when two weaker competitors get together. It's uncouth. It's stranger still to see it from Google, a company whose success is built on subtlety. Those little ads that pop up when you do a Google search are unobtrusive, but 10 cents at a time, they've created a business with $17-billion in revenue.

And that, in a strange way, explains the paranoia.

Look: Google's a great company. You don't go from zero to $155-billion in market capitalization in a decade unless you've got something. Google is - even after a 28-per-cent drop in its stock price since Jan. 1 - a more valuable company that Cisco Systems, Apple, Coca-Cola, IBM, PepsiCo or Intel. It's worth about twice as much as News Corp., Gannett, New York Times and Washington Post combined.

But even great companies have weaknesses, and Google's is that it's a one-trick pony. It may be a terrifically profitable trick, but still: 99 per cent of its revenue comes from advertising, and despite its diversification into other products, like online maps, most of that dough still comes from basic Web searches.

Google became the gateway to the online world because it built the best algorithms for finding stuff fast. That business model is excellent (check out the 25-per-cent profit margins) but it works better if Google doesn't have to share the revenue. And that's becoming harder to sustain.

In one case, a French court held Google liable for allowing advertisers to select trademarked terms as keywords. Similar cases are being fought in the United States, Germany, Israel, Italy, Austria and Australia. Meanwhile, the big guns of media are starting to fight back to protect their creations. Viacom's lawsuit alleging "massive intentional copyright infringement" against Google-owned YouTube is the best-known example, but Google also faces legal battles over its use of others' news, video, images and books.

Where does Yahoo come in? It has a different strategy, buying or creating its own exclusive content. If you're a sports fan and want to read the talented baseball columnist Jeff Passan, he's found only on Yahoo. If you live in Seattle and are looking for news clips from the local NBC affiliate, Yahoo has those, because of a deal it made with the station's owner. (Yahoo signed a similar arrangement with CBS in 2006.)

The main problem with this is that it's expensive. For a company the size of Yahoo, there's a limit to how much you can spend hiring journalists and acquiring TV rights. Microsoft, alas, has fewer financial constraints. About $50-million in cash flow comes through the door every day and there are only so many ways to reinvest it.

So imagine this scenario: Microsoft acquires Yahoo, giving it a real Web portal for the first time. It begins bidding aggressively for the rights to exclusive content, just as the TV networks do. (Think of Yahoo buying the webcast rights to the Super Bowl, for example, or striking a revenue-sharing deal with Gannett to become the online home of USA Today.) As Web traffic moves to Yahoo, users discover that its improved search engine is actually as good as Google's.

Google would have to respond. But it would cost money, and those fat profit margins would get thinner, and investors wouldn't be so excited about paying 37 times earnings for the stock. Could that be what's really worrying Google? Microsoft's evil past doesn't have much to do with it.

[-Jrabbit]

Google is - even after a 28-per-cent drop in its stock price since Jan. 1 - a more valuable company that Cisco Systems, Apple, Coca-Cola, IBM, PepsiCo or Intel.

I find this a little scary. I mean, Google does not have a tangible product.

[Asher]

It's definitely not something I'd be jumping up and down to invest in right now. Where the ad market goes, Google goes...

[DanS]

That article has no substance. For one, even if this hostile takeover proves to be no real threat, it behooves Google to make Microsoft pay more for Yahoo, either in time or money.

[Asher]

The point is Google is politiking without substance themselves. That was the substance.

[MarkG]

well so much for the offer being a highly profitable for yahoo's shareholders

Yahoo shares rise above offer value
By Richard Waters in San Francisco

Published: February 8 2008 02:00 | Last updated: February 8 2008 02:00

Yahoo's share price crept above the value of Microsoft's takeover offer yesterday as Wall Street anticipated that the software company would pay more to bring a quick resolution to its unsolicited bid.

The gathering belief that Yahoo would succumb to the takeover approach followed a week in which the chances of a rival bid emerging, or of Yahoo remaining independent, have appeared to fade.

Jerry Yang, chief executive, wrote to employees on Wednesday saying that the company was studying options other than a sale to Microsoft.

However, some potential buyers have already ruled themselves out and most investment analysts maintain that it is hard to see any other company trying to match the 62 per cent premium that Microsoft, led by Steve Ballmer, chief executive, put on the company with its bid.

Yahoo's shares closed at $29.04 yesterday, above the $28.87 value implied by the cash-and-stock offer, and the first time that the "spread" between the two has reversed.

Given the length of time it would take to complete an acquisition, as well as the lingering risk that regulators might interfere with the proposed deal, the higher price suggests that investors are anticipating that Microsoft will end up offering $2-$3 a share more to win over Yahoo's broad, according to one arbitrage trader.

The share price dynamic reflects a belief that "Microsoft wants to do this in as friendly a way as possible", another trader said.

Going public with its offer last week, while an aggressive move, had been necessary given Mr Yang's personal resistance to a sale but the software company would now do all it could to win over Yahoo's board quickly rather than risk a drawn-out takeover battle, this person predicted.

While Yahoo's directors have yet to pass judgment officially on Microsoft's bid, Mr Yang's comments suggested that the company was looking for ways either to escape the unsolicited approach or to force Microsoft to raise the offer.

However, the lack of obvious alternative buyers had left Yahoo with a difficult hand to play, several analysts said, giving it little leverage in any future negotiation. One idea under review at Yahoo has involved an alliance with Google that would involve outsourcing part of Yahoo's business to the search company. But that is considered a long shot by most analysts given the difficulty of getting the deal past regulators.

Microsoft's shares edged down more than 1 per cent yesterday, extending a decline that has taken more than 12 per cent from its stock price since it disclosed its interest in Yahoo, while the internet company's shares rose more than 1 per cent during the day.

With half the proposed takeover to be paid in cash, and half in Microsoft stock, the value of the offer has fallen along with the software company's share price, putting the value of the entire deal by yesterday night at $41.5bn.

https://www.ft.com/microsoftyahoo

Copyright The Financial Times Limited 2008

http://www.ft.com/cms/s/0/33fcf9b2-d5e7-11dc-bbb2-0000779fd2ac.html?nclick_check=1

[LordShiva]

Originally posted by DanS
That article has no substance. For one, even if this hostile takeover proves to be no real threat, it behooves Google to make Microsoft pay more for Yahoo, either in time or money.

Google is ****ting itself over this.