Yahoo hullabaloo
The hoots of joy from deal-starved Wall Street could be heard all over New York this morning.
I'm filming a Â鶹Éç Two documentary here about the causes and aftermath of the credit crunch.
And the absurd euphoria generated by tilt at was not a healthy sign. It sounded to me like a mob of desperate bankers and investors frantically clutching at lifebelts made of straw.
The fact is it's only one deal.
It would be big, though hardly mega.
And Microsoft is one of the few companies on the planet that generates so much cash that it's wholly insulated from the drought in money markets
In other words, it would be silly to extrapolate from this deal anything terribly positive about improvements in business confidence or the possibility that more takeovers are on the way.
The only deals in town - bar this Yahoo one - involve commodity companies like , near-bankrupt banks or insurers and the moneybags state investment arms of Asian or Middle Eastern economies.
And that is not going to change in a hurry.
As the latest confirm, the momentum behind the deceleration in the world's biggest economy is worryingly strong.
The Microsoft bear hug on Yahoo is a model of predatory opportunism.
Yahoo's latest results were seen by many of its shareholders as confirmation that as an independent business it is a wasting asset.
But, in seeming contradiction to that view, it has also become fashionable to suggest that Google's days of total invincibility and dominance of the search business may be drawing to a close
Google's last set of figures were only good by the standards of mortal businesses, rather than superlative.
So the Microsoft message is that Yahoo crunched together with its MSN might just capture some market share.
But, to quote the management consultant's cliche, if the deal happens its success or failure will all be in the execution.
As for , it will probably see the deal as an example of what I think of as being a Buffettism, namely that putting together two bad businesses usually creates one very big bad business.
I would verify that I have just re-purposed an Omaha aphorism, but am powerless to do so because my clunking BlackBerry won't let me access Google.
Which tells me that when it comes to the search business, Google is more than just the market leader. It defines its industry in a way that will be hard to break, even for a Yahoo fuelled by Microsoft's knowhow and rivers of cash.
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Well of course not, lord forgive we should look for any positive news out there! Now the High Priest of Doom and Gloom is making a programme on Â鶹Éç2 all about the credit crunch, that will be fun to watch, I take it Robert you will be wearing a black cloak and carrying a sickle?
Hi Robert, seems you need to replace your 'clunking Blackberry' with one of those whizzy new iPhones.....:-)
When the history book are written in 50 years this deal will be seen as the beginning of the end of Microsoft Corporation.
I agree, Microsoft + Yahoo is no winning formula. Microsoft would do better by being brave and turning msn search into something exciting, say by partnering with Jimmy Wales on Wikia Search.
Yawho ?
this article is like a ray of sun in total darkness of todays us market and business review.Thank you
Robert, what a total non-story. Who cares, apart from you and the Yahoo employees? Are you employed by MS and/or Yahoo?
It sums up the mood in the market to a tee, for the time being only cash takeovers are going to be taking place and they are few and far apart. Banks and investment groups still have to shift the debt they have agreed to on hundreds of billions of pounds of past debt based deals before the credit cruch happend. And in the current market of higher interest rates on business loans and the weaker outlook for the world economy means a greater chance companies will find it hard to repay these debts which means investors are going to stay away from buying this debt in the first place that the banks are trying to sell on.
One business that doesn't 'get the net' buying another business that doesn't 'get the net', wow that really gets me excited about what they'll be able to achieve.
Robert thank you for bringing us the Northern Rock story (what an ongoing shambles) and I hope you will be unveiling any further BOE bailouts if they become secret to us poor taxpayers!
Please some perspective here though: Whilst deals may have all but dried up the US job creation figures are error prone at best and have been massively revised upwards before. Regarding Yahoo + Microsoft surely the value and future revenue stream opportunities will come from community sites (e.g. Flickr) which even Google has not yet successfully exploited. Oh and we also conclude search engine penetration of mobile devices is poor. You never know we could end up with Office Express in the browser from this! I remember when for some the Y2K issue meant the end of the world was nigh. When did news (in general) = ONLY doom + gloom.
Businesses in a strong financial state will now be looking to take over weaker ones. T'was ever thus. It''s just that now the strong companies are those that have cash rather than being geared up to the eyeballs.
Paying cash for a business rather than invoking financial wizardry to load up the acquired company with debt sounds a 'prudent' way of operating to me.
The euphoria over the deal is perhaps overblown but so have been the doom and gloom stories run by the media in the last few months as financial journalists sought to jump aboard the Global Recession Express.
This may or not be a one off but you were very quick to jump onto Northern Rock (a company which would fit into Microsoft's foyer) and spin out scenarios of Armageddon for days and weeks.
I wouldn't dismiss the 'moneybags state investment arms of Asian or Middle Eastern economies'. Whilst the headless chickens in the investment banks are sorting out their parachute payments and golden handshakes, some good old fashioned cash might snap some very attractive bargains.
However your reporting always brings fresh surprises This must be the first time that I have ever wished for more darts and snooker on Â鶹Éç2!
No wonder this news is greeted with anticipation by Wall St. But the problems there are not going to be solved by one takeover. The banks are bust, see
but make sure you're sitting down first...
in the us banks are bankrupt. they actually have *negative* rserves.see
the only way to bail them out is with hyperinflation. the economy is collapsing. why are you even talking about microsoft anf yahoo?
Ok, so Microsoft are selling less operating systems, but they are still the market leader by a stretch, and Yahoo in my opinion are still pretty innovative. Right now it's fair to say that this is the best time for Microsoft to acquire Yahoo at a fair price. I think some good will come of this partnership. My god, all it takes is for the two companies together to fiddle with their search algorithm and we could see some real competition for Google. Go for it, we the end users have nothing to lose.
An alternative view on the M$/YH deal (the entire piece is well worth a read):
Enjoy the weekend's rugby!
ed
The suggestions given by Mr.Balmer in his letter were great. It will be a great opportunity to Yahoo to merge with Microsoft. When a giant company can not sustain its competitive advantage against the competitor then its better to merge with the next leader to compete with the main competitor. In future the combination of Microsoft and Yahoo will emerge as the strongest competitor to Google.
It is impossible to know what will come of this deal. However, you have two very powerful teams with lots of talent, lots of money, and lots of incentive. Whether this merger pans out or not will only have to wait for time. Wall Street pundits rarely get reminded how wrong they've been in the past. Based on their generally miserable track record, it's hard to see why anyone pays any attention to them at all anymore. Here are some of the dumber deals they loved not so long ago. AOL and Time Warner, Chrysler and Daimler, and Hewlett Packard and Compac Computer. And then there was MCI and Worldcom. All of those ideas were dumb, all of them blew up, there was never anything obvious to be gained by the stronger of the two in any of them but wow did they generate excitement when they first were announced.
Even if nothing comes of this deal, its a loss Microsoft can absorb. Love them or hate them, they have been the most successful software developers in the world, not an opinion but a fact. That is why over 90% of all the personal computers sold anywhere use their products. BTW, should Microsoft decide to go to war against Europe by refusing to sell there, they could put Europe out of business single handedly, just by developing new patches to existing products which would render Europe's software incompatible with the rest of the world's. Something to think about.
I agree with with our simeon friend at #13 Robert - why are you talking about the latest circus act to entertain the masses - MS/Yahoo?
If you want to retain your cutting-edge journalistic reputation, I suggest you start telling your large following about the possibility, nay, inevitablity of where all this is leading.
Hi Robert,
PLEASE PLEASE Do a follow up to the Egg story.
It seems unprofitable customers are being the real target - which says alot for the forthcoimng credit reviews for many people. If "decent" clients are being denied credit - what will happen to the 1.6million who have to renew their mortgages within the next 12 months - many thousands of whom, of course, have a "NR" mortgage..!!:)
(By the way - I posted a comment in early December saying what a joy it was to do the christmas shopping in York.. It was easy to see then that a slowdown was happening)
No. I find the story very meaty, meaty because its begs several important questions.
1) I know what I think of the flexing of the jaws of MSFT, I bought 500 shares as the stock shed 7% of its value in a single day. Investors aren't just nervous, they were apparently easily stampeded by ostensibly non-news as this is until Yahoo! is charmed by the embrace. MSFT stock will recover handsomely long before that eventuality.
2) As an American, I have to wonder what other capitalists worldwide think about $44.6 billion dollars moving in a lump sum to accomplish any supposed end? Those are big guns. And Google has every reason to shed share value at the prospect. MSFT will certainly not have to go to the local Payday Lender to consummate this marriage with finesse. MSFT has deep pockets and likely will simply cut the check and toss it in the mail.
3) Yahoo! is an extremely diverse company. It isn't just international in a big way, or a search engine in a big way, it is content and a host of good will in the Internet competency arena. Yahoo! has gotten it done for quite a long time in terms of the Internet industry.
4) The bigger picture is the question though. For months and months everyone around the world and quite a few Libertarian economists here in the U.S. too have been screaming "The sky is falling!" about the dollar and the economy. It's the end of the world for these naysayers until I hear of some company claiming they're making a fair cash offer bid for MSFT out of their spare change.
Don't hold your breath.
Don Robertson, The American Philosopher
I read in the wall st journal, that chap yang under no circumstances wants to or will let yahoo merge or be taken over either hostile or any other way,could your panalists please clear this matter up for me.
Once more the prince of darkness speads a little more gloom and despondency around.
I wonder what pessimistic Peston will do with himself when eventaully the markets recover and optimism reigns. With a bt of luck he will go into perpetual hibernation
Google is king when it comes to content and Microsoft hate that. Yahoo would get them the content and users that MSN has never quite managed to achieve so from that point of view it makes sense (although the numbers may always be questionable).
What I think is more interesting is what happens from here.
Can Murdoch really table a counter bid? For what it is worth I think he will probably stay away from a fight with cash rich Microsoft.
Is this the start of a new Microsoft strategy for market domination? Well I think it could be, it has the software and if it gets Yahoo then it has the content, the only piece missing then is the hardware and with Motorola seemingly up for sale this could be the start of a spending spree for Microsoft.
Talking of Motorola Robert, you missed that when you listed the only deals in town. There are many potential buyers which could spark a bidding war with players like Dell, Samsung, Huawei and Sony Ericsson among the list of potential buyers.
The Internet Advertising model is grossly overhyped -- Users usually do everything they can to either ignore it totally or pay a small premium to block out annoying adds.
The pay per click model also invalidates the real purpose of a search algorithm -- you want, not to be led to the site who has paid the most money --for example if you search Quantum Computing do you want info on "Quantum computing" or a company called "Quantum computing" who will be trying to sell you something.
The days of Microsoft + Yahoo and Google whilst not over yet will eventually be in terminal decline as smaller and more sophisticated search facilities become available.
Any company byuing into Internet Advertising" is actually making a serious mistake IMO as it's not sustainable in the long term.
Ok so its now Monday morning.
"Wuzzup?"
"Reports said Yahoo would consider an alliance with Google as one way to fend off Microsoft's bid."
Oh ok. Monday morning pundits. Don't you just love them? Full of "you heard it here first!" kinda stuff. Roll on Tuesday.
The links via the posts on this thread at 12 and 13 do suggest that something approaching financial meltdown is happening in the US.
The amount of money being 'borrowed' by 'unknown' institutions there from the Fed. makes our episode with NR look like a tea party.
If only I'd taken up that offer of an allotment when I had the chance.
The two Instant Messenger services are already crossing-over. I think the two companies have had advanced talks long before the Press Release.
Google has grown far beyond Yahoo!.
My main worry is , how will they make the software much better than now?. Technology is fast moving , they should tell us in advance what they are bringing out in the next ten years.
This is not about content or advertising, the Google model is not hard to replicate technically (MS has already bought the search engine technology needed).
This is about buying x million email addresses, address books, calendars, and building the critical mass to muscle through the Microsoft standard for all those great new apps of the 21st century: voice, video, home entertainment, games etc.
Google doesn't have millions of desktops around the world that need to be renewed every 3 years. And even after MS was slapped on the wrist by the EU, IE is still the de facto standard for Web sites.
The internet is about the IDEA not the economies of scale. How else do we have billion dollar companies that spring up overnight with very little capital investment? (YouTube, Google etc..). The IDEA is what Google have and what Microsoft/Yahoo lack. Putting two companies with NO IDEAS doesn't solve their problems. It's just going to prolong the agony for these two businesses. A very short term fix IMHO.
The momentum is what everyone has to look at with MS and Yahoo. Although MS and Yahoo make money they are losing money in new markets and their existing markets (although fine at the moment) are on a downward spiral. Vista was the writing on the wall for MS as new users realized that they don't need VIstas' features because their software needs are mostly met through a browser. The cash cows of Windows and Office are slowly dying but latest figures from MS have been hiding that reality.
The fact is that it's a new industry with new rules where the "Idea" is king. The fact that MS doesn't really do "new idea's" is all you need to know about Microsoft's long term future...
no good for M'SOFT AS YAHOO is sinking ship with no rescue boat onboard.
AO #29 - Microsoft has survived and thrived for a long time without any ideas or innovation of its own. They do this precisely because of economies of scale on the *demand side* (the network effect). In other words they own standards that users need in order to successfully share information, and they are standards purely because of the number of users. It is less clear that the MS Office and IEs of the past can be replicated for the new generation of home entertainment PCs, but MS will give it a good go! Yahoo is simply about buying the initial customer mass.