Falling Microsoft Income Endangers Yahoo Bid

Dionysius, God of Wine and Leaf, points out a new wrinkle to Microsoft's pursuit of Yahoo. The most recent quarterly results, which saw Microsoft's earnings drop by 6% from the previous year (revenue from Windows alone was down 24%), have caused the stock to dip. This has reduced the value of the cash-and-stock offer from its original $44B to something nearer $40B. Yahoo, of course, has maintained all along that the original offer was lowball. A business professor is quoted: "Whatever leverage [Microsoft] built up in the last few days could be slipping away."

Comments

Clearly caused by H-1b limits

[Baldrson]

It's clear that if Bill Gates could just get the H-1b caps lifted, the best and brightest from around the world could come to the US and be paid $100k straight out of college to save Microsoft.

Anyone who was around during the dot-com era remembers how it was H-1b limits that caused the crash of that wonderful era. Those who do not learn from history are doomed to repeat it.

Re:Clearly caused by H-1b limits

[pubjames]

Yes, but $100k is now worth relatively little in proper money.

I was going to make a joke about this but actually its not funny.

Re:Clearly caused by H-1b limits

[anandsr]

Actually it will be very easy to reduce the demand of H1-B visas. Just stop them from being slave laborers to the companies importing them. This can be done by just allowing them to switch jobs, and allowing them to apply for Green Cards without sponsorship.

Currently the companies hold the H1-B visa holders by a tight leash because they can't switch jobs once Green card is applied. Also they can't switch jobs in the early years.

If both these restrictions are removed, companies will not be able to afford to pay their employees less than the fair market value. And then the local people will be able to compete more easily. Companies will not be able to use H1-Bs as a source of cheap employment.

So ask your senators to remove restrictions that cause H1-Bs to be looked as second class employees. Let them be treated at the level they merit, and you will not lose out on jobs.

Re:Clearly caused by H-1b limits

[JohnBailey]

It's clear that if Bill Gates could just get the H-1b caps lifted, the best and brightest from around the world could come to the US and be paid $100k straight out of college to save Microsoft.

Anyone who was around during the dot-com era remembers how it was H-1b limits that caused the crash of that wonderful era. Those who do not learn from history are doomed to repeat it. Ahh.. so not people over investing in any idea that came along, no matter how outlandish it was, just because some of these ideas might pay off in a big way?

Re:Clearly caused by H-1b limits

[jkrise]

It is absurd to suggest that (a lack of) engineers caused Microsoft's downfall. The more engineers and managers it threw at Vista; the worse the end product. Marketing and (poor) management will be the downfall of Microsoft; not engineers or programmers; H1B or otherwise.

Re:Clearly caused by H-1b limits

[Jesus_666]

Except if you happen to live in Europe, in which case it is funny. Well, unless you realize that a falling Dollar might negatively impact the country that creates 90% of our culture and goods, which is sad on many levels.

Re:Clearly caused by H-1b limits

[CastrTroy]

$100,000 US is still quite a bit of money. Expecially if you are talking about yearly gross income. I don't think you realize just how little money some people can live off, even in the United States. $100,000 should be more than enough to support a family. If it's not, you aren't spending your money correctly. If you aren't supporting a family, then you should be even better off with all that money.

Re:Clearly caused by H-1b limits

[pubjames]

Five years ago 100,000 USD was almost 100,000 EUR, which is a big annual income. Two years ago it was 85,000 EUR, still pretty high. Now it is about 64,000 EUR.

Re:Clearly caused by H-1b limits

[AvitarX]

It is definatly much better that they get payed much less in their home contries and develope tech economies that will be more and more independant of ours.

Better for the world economy (maybe, cheaper software production could be a win, but artificial controls cause a drag in general), and for the 3rd world economies that can produce qualified people. The preventing of a brain drain to our country is of course bad for our economy.

Disclaimer, written by an American.

Re:Clearly caused by H-1b limits

[maxume]

Compare the dollar and euro salaries for jobs. The numbers make more sense now than they used to(i.e., people making 60,000 dollars do about the same work and have about the same buying power as people making 40,000 euros).

Re:Clearly caused by H-1b limits

[Opportunist]

Huh? How does this shake China?

Re:Clearly caused by H-1b limits

[Opportunist]

Oh, there's an easier way for this: Just be stringent with the part that deals with hiring people with special skills or skills that no or or at least not enough US citizens can provide. And I'm not talking about "being cheap". I mean certain key skills. And you'll soon see far fewer H1Bs being issued to cheap slaves.

For the record, I'm no US citizen, and I do actually think that this might increase my chances for a visa. If I ever wanted one, that is.

Re:Clearly caused by H-1b limits

[Jesus_666]

"Creates", not "manufactures". Also, don't forget the culture. There aren't too many Chinese TV shows and movies to be seen around here and the radios haven't even heard of Jay Chow. Apart from the music, where I tend towards other countries, entertainment-wise the States rule supreme. A good movie has a much higher chance of being from LA than from Munich (or Beijing, for that matter). Same goes for TV series.

And the more non-throwaway goods are usually designed in the USA or Japan and manufactured smewhere in China or its neighbour countries. For example, an iMac is hardly a Chinese creation, even though it's assembled there.

Re:Clearly caused by H-1b limits

[Opportunist]

Give it 10 years. The US should have learned their lesson with the japanese way of "assemble - imitate - innovate - buy out", which happened for them after WW2 and into the 60s.

Wonder what industry of the US left by the Japanese will be taken over by the Chinese. Cars and electronics are taken.

Re:Clearly caused by H-1b limits

[CastrTroy]

You really have to account for the cost of living in with your calculations. Even though the US dollar and CAN dollar are at par, most things in Canada still cost more than they do in the US. So you would be much better off living in the US making $US 100,000 than you would be in Canada making $CAD 100,000 even though the currencies are worth the same amount.

Re:Clearly caused by H-1b limits

[timeOday]

It's hard to compare, since Europeans pay so many taxes, but then Americans pay so much for health care and education.

Since the US economy relies so heavily on imports, I'm surprised the devaluation of our currency hasn't caused more inflation. We've felt the impact through gas prices, certainly. But imagine if imported cars, clothing, and electronics had shot up that much. We'd be wiped out. I noticed, for instance, that motorcycles now cost significantly less in Euros than US Dollars, but the difference is less than the exchange rate says it should be.

I will say this, for an American to tour Europe has become impossibly expensive.

Re:Clearly caused by H-1b limits

[Acer500]

For some of us in the 3rd world, $100k is not "little money", I wouldn't make that much in 10 years as a salaried worker (which I don't expect to be for 10 years, going independant is the only way to make decent money in my country).

OF COURSE I'd take that H1B visa in a heartbeat if it was offered to me (a coworker got one and earns about $80k a year, he's really, really good so I think it was not a "waste" of your H1B visas).

Re:Clearly caused by H-1b limits

[bishiraver]

A financially successful movie with an over-emphasis on special effects has a much higher chance of being from LA than from Munich (or Beijing, for that matter). Same goes for TV series.

There, fixed it for you.

Re:Clearly caused by H-1b limits

[maxume]

The dollar is probably somewhat weaker than it will be in the long term, and this is coming off a period where it was pretty strong compared to the long term. That exaggerates the comparison (because we remember recent stuff more powerfully).

There is some good news in the fact that Europe is having trouble doing business in the U.S., it means that things have swung to far and will probably swing back. If Europe was doing crazy business with U.S. companies despite the dollar, things would be pretty bleak.

Re:Clearly caused by H-1b limits

[Jesus_666]

Compared to what the German movie industry regularly produces that IS good.

Re:Clearly caused by H-1b limits

[clampolo]

If both these restrictions are removed, companies will not be able to afford to pay their employees less than the fair market value.

I hate when people make that argument. It is simple economics: increase the supply of something (labor) and the cost (wages) will decrease. The statistics of stagnant US tech wages support my view of there being no shortage whatsoever of labor.

Re:Clearly caused by H-1b limits

[Software]

This can be done by just allowing them to switch jobs, and allowing them to apply for Green Cards without sponsorship.

I don't know about sponsorship, but the H-1B visa has been portable for several years. See http://www.immihelp.com/visas/h1b/portability.html

Re:Clearly caused by H-1b limits

[Opportunist]

Beauty is in the eye of the beholder. If you check the "best foreign film" section of the Academy Awards, you'll find a fair lot of German movies in the recent past.

Aside of that, a fair lot of German productions were quite more interesting than a lot that was produced in Hollywood lately. But then, I prefer movies with a script to movies that rely only on special effects.

Re:Clearly caused by H-1b limits

[Jesus_666]

"Regularly" is the important word. There are some gems; Run Lola Run comes to mind, as does Das Experiment. On the other hand, there is an endless number of so-called comedy movies following the same half dozen concepts most prior German comedy movies have used - right down to reusing most of the jokes. There are rare exceptions, though, like "Das merkwürdige Verhalten geschlechtsreifer Großstädter zur Paarungszeit" ("The curious behavior of sexually mature big city inhabitants during the mating season").

Germany has some very funny comedians and some great comedy shows, but our talent seems to lie more with funny shows, not funny movies. Except if the movies are animated; that usually means they're based on comics by artists who know what they're doing (unfortunately it appears that neither the Werner movies nor Kleines Arschloch have been released outside Germany).

In general, German movies have (in Germany) a reputation of tending to get things wrong or simply failing to captivate. Much of that probably lies in the German tendency towards critique and self-loathing, but we generally don't produce that many good movies. A few great ones and a lot of junk.

Come to think of junk, we do have some quite talented producers of trash movies (even if we don't count Uwe Boll). The Neverhorst Company produced some great pieces of trash like the superhero anti-epos Captain Cosmotic or the war/disco movie Operation: Dance Sensation. Their plot devices are about at the same level as Troma's; while Captin Cosmotic doesn't have random barrels of nuclear waste, it does feature a woman getting shot with an alien weapon that unfortunately only kills aliens - if it hits a human that human gains super powers. It also features Earth's core being stolen and transported away in a regular steel barrel.


To sum it up, Germany's talent with regard to movies lies with horror, suspense, WWII dramas and trash. Unfortunately most German movie studios (ie. the bigger German TV stations) still think our talent lies with family-friendly entertainment.

Downward spiral?

[Tom]

Not only the Yahoo! bid. Wasn't MS built up kinda like a pyramid scheme, with their reliance on stock options as payment for top professionals and other things like that? Someone calculated a couple years back by how much about the MS stock can slip before it sets a downward spiral into motion that will wipe the company out. Explained to me at that time while they are so hell-bent at domination and expansion, no matter the cost. Given their makeup, if MS falls, it will fall hard and far.

Re:Downward spiral?

[Anonymous Coward]

There is one fallibility in your logic. You're assuming that Microsoft is something of an Enron - that all of their value comes from their stock. This is simply false.
Microsoft's value comes from their assets, their market power, their product reach, and their ability to throw money at problems until they get something people will buy. Might I remind you that Microsoft keeps something like $30 billion in cash - instant liquidity - at all times. Microsoft can take a stock hit and keep on chugging. Don't make the mistake of underestimating Microsoft's business prowess - again, they are no Enron.
You're scenario is simply a fantasy adopted and spread by people that hate Microsoft because of their success and supposed lack of innovation. Might I remind you that a lot of the reason computers have been able to advance as quickly as they have is because we have a single majority platform. Software and hardware can compete on that universal platform instead of between multiple incompatible platforms. There is a reason we like standards. Don't forget that.

Re:Downward spiral?

[Bert64]

Software can compete on microsoft's platform, if microsoft is not trying to compete with that software. Just you try producing a word processor for windows, you will waste thousands of man hours reverse engineering proprietary microsoft formats, instead of improving your product. And even if you do spend the time and effort to produce a product that is both superior and compatible, you will face a serious uphill battle trying to get anyone to use it.

If we had a truly open single platform, progress and innovation would have been a lot faster.
It was always inevitable that a more open platform would take over from the myriad of incompatible systems that were available years ago, unfortunately it was only the hardware that was open, or at least competitive, while software became more locked in than ever.

Microsoft have stifled the evolution of the open IBM compatible platform, not helped it. They stalled the transition to 32bit, and are doing the same with the transition to 64. They delayed other valuable technologies like USB and SATA by being way behind everyone else in supporting them. And they are keeping people stuck on the crufty legacy bios, because of their unwillingness to support EFI, or anything else that would be newer and better. How many other good technologies have been delayed or killed completely, simply because microsoft couldnt be bothered to support them, or supported them in such a half assed way as to make people falsely perceive them as useless.

They (along with other closed source vendors) are also stopping people moving to other superior architectures (some of which are more open than x86, but less widely supported because they wont run windows).

Re:Downward spiral?

[Tweenk]

a lot of the reason computers have been able to advance as quickly as they have is because we have a single majority platform Incoming Bullshit Alert...

Re:Downward spiral?

[hvm2hvm]

Oh man, it would be perfect... if they fail maybe they will at least release the sources to windows to ease up their stay in hell when they die and we would have enough material for ThedailyWTF for years!

Re:Downward spiral?

[Jesrad]

It is the falling revenue that hubris is set in motion. It is by the gook of management that self-destruction acquires speed, the product line acquires bloatware, the bloatware becomes a warning. IT is by falling revenue alone that hubris is set in motion.

Re:Downward spiral?

[miffo.swe]

"Might I remind you that a lot of the reason computers have been able to advance as quickly as they have is because we have a single majority platform."

Thats the worst load of crap ever uttered in this industry. Most things on the hardware side has been hold back because of Microsofts unwillingness to support new technologies.

If you take your time and compare what was on the market when Microsoft started dominating the x86 platform you will find that first Dos then Windows was long behind the competition. They have always been lagging behind the competition, since day one.

Their saviour was that IBM released their platform into the open because of their problems with the DOJ (ironic isnt it?). They got a hold of a platform that took off like a rocket because of it being open and managed to lock down the software side of it. Had IBM held onto x86 Microsoft as we know it would still be making stoplight-software.

I think our software snails along and its development is painfully slow if you look at what happens in labs around the world. Microsoft is just now implementing things in Windows that has been standard in Unix since late 60's. If you think thats fast meet my lawn, enjoy watching it grow!

Re:Downward spiral?

[cyphercell]

So, microsoft is essentially a financial institution? Then what is being discussed would have to be considered a run on the bank, er, stock. You think microsoft's brand value is going to be worth more than the lint in my belly button if everyone decides to sell? Hell, with that type of scenario the thirty bln looks like just enough to maintain plausible deniability. I mean the big difference here is that enron had *something* tangible (energy), microsoft has all those vista licenses everyone is clamoring after, that's got to be worth something right? Not necessarily, if the market turns on MS then they have support for software currently installed and whatever they can sell of the new stuff. This is valuable, but not nearly as valuable as Microsoft's brand.

Re:Downward spiral?

[vandan]

Software and hardware can compete on that universal platform instead of between multiple incompatible platforms

Flog on. One of the reasons I moved to Linux was that the more open-source software I used, the more complete my 'toolkit' became. Microsoft give you only the bare minimum, and then they continue to fuck with what they've given you to 'encourage' you to upgrade, purchase more, upgrade, license this, buy that, etc, etc.

I can see why you posted anonumously

Re:Downward spiral?

[SL Baur]

Had IBM held onto x86 Microsoft as we know it would still be making stoplight-software. You have more than two errors there. IBM chose the 8088 as their first PC chip. It was Intel's own documentation for that chip that suggested it was best used for controlling traffic lights (the docs I had recommended 8086 for regular microcomputer usage). And if Microsoft had been doing traffic light software, there would have a boom in the ambulance-chasing lawyer industry like you wouldn't believe. Oh wait ...

Re:Downward spiral?

[miffo.swe]

http://en.wikipedia.org/wiki/Traf-O-Data

Maybe we should thank heavens that Microsoft went towards the PC world?

Re:Downward spiral?

[oronet commander]

It's the first time in my years of slashdotting that I've craved for mod points. You deserve all our respect, sir

Re:Downward spiral?

[Tom]

Might I remind you that a lot of the reason computers have been able to advance as quickly as they have is because we have a single majority platform. Which, of course, explains why windos is lagging behind OS X in virtually everything except market share, and why there is absolutely no innovation at all in markets without a monopoly, like, say, the car market, the mobile phone market, or, for that matter, almost every other market.

Re:Downward spiral?

[Locutus]

unless the investment community decides to bail, they'll keep a flat price for a while. But if the investment community has had enough of flat MSFT growth, constant reliance on Windows for the majority of profits, and now a sign of declining sales. Your falling house of cards comment just might have some traction.

What I found very interesting was the Microsoft didn't downplay future pricing valuations, they started pumping the investment community up. THAT is a bad sign and with the fact that the PC OEM market showed close to 15% growth while Microsoft Windows showed a 24% decline says something serious is going on.

Something fundamentally different seems to be afoot in the financial books at Microsoft.

LoB

Re:Downward spiral?

[Locutus]

Microsoft's value comes from their assets, their market power, their product reach, There physical assets are a tiny part of their "value". CD's and cardboard boxes aren't worth much. Patents might have some value but as we've seen how poorly they've researched their patents, again this is only a tiny part of their "value". Their distribution channel is where all their "value" is. They dictate what their channel partners do day in and day out.

and their ability to throw money at problems until they get something people will buy. The problem here is that for something like 20 years they've not been able to make profits on pretty much everything else they've tried. They did a nice job leveraging the position/power they had with Windows and got MS Office off the ground. But outside of the Windows OS, they've gone no where and losses in the billions annually are the norm. The Xbox division showed a profit of $98 million but that was with a $1 billion write off last year. That $98 million is but 1/10th of the loss they took in one quarter. Windows Mobile, that's lost them over $10 BILLION over its lifetime. So they have a very poor record of making profits on everything they've tried outside of the desktop Windows OS. And didn't they once pay AT&T $5 Billion to use Windows CE? They are now paying people to use Silverlight and there is no direct profit from this product. It's all been market protection expenses and only a tiny tiny blips of declared profits.

Might I remind you that Microsoft keeps something like $30 billion in cash - instant liquidity - at all times. Microsoft can take a stock hit and keep on chugging. Don't make the mistake of underestimating Microsoft's business prowess - again, they are no Enron. They've already been buying their own stock to keep it flat. Not long ago, they had over $40 billion in cash but with the size of Microsoft, billions go out the door quickly. Not instantaneous but fast. And those H1-B visa's are getting more and more important for Microsoft as value to employees has declined and they require more foreign employees who'll work for them because of where they are and a false sense of "who" they are. The Microsoft brand is already falling.

I'm not cheering yet but there are some fundamental changes going on and Vista might have been the trigger pulled to start the long slow decline from market domination. Time will tell.

LoB

Re:Downward spiral?

[calebt3]

So they have a very poor record of making profits on everything they've tried outside of the desktop Windows OS. Doesn't MS Office do well?

Re:Downward spiral?

[Tenareth]

And if MS falls in the current economy, it'll take a good chunk of the NorthWest with it (the part not going into recession). They own millions of square feet of real-estate and employ thousands of people.

Imagine the results of releasing even 15% of MS's employees into the workforce?

MS is paying for some bad choices, but this would be a bad time for them to pay for them, as a lot of people would be impacted.

Re:Downward spiral?

[Locutus]

So they have a very poor record of making profits on everything they've tried outside of the desktop Windows OS. Doesn't MS Office do well? MS Office is not outside of the leverage of desktop Windows OS. This is what was the intent was of the quoted statement. Yes they make money at it and if you want to list two other places they make profits also list Windows Server software and a much smaller profit comes from Microsoft's mouse and keyboard.

Unfortunately for Microsoft, they are all tied to the Windows desktop OS. Microsoft has been a one trick pony for over 20 years and it is why they cross the legal/illegal line over and over keeping the Windows OS protected. So all those billions and after 20 something years, they've only been able to keep others out but have failed time and time again at making any money outside of their desktop OS monopoly. IMO.

LoB

Re:Downward spiral?

[RobertM1968]

Indeed correct. The 8086 was considered too expensive in what turned out to be an already expensive investment (buying a PC with an 8088). Also, as IBM had no expectations of it's success at the lower costing 8088 PC's, I am sure that they expected even worse had they went ahead with the 8086.

Re:Downward spiral?

[Trogre]

What? Isn't that something to do with coffee? Are you that "teeth acquire stains" guy?

Re:Downward spiral?

[Locutus]

FYI, those were statements of facts and not random "bad word about Microsoft" so I don't get how your comment is relevant.

But since you brought it up, I will try a simple explanation for why some people might want to dislike Microsoft and the way they 'do business'.

First of all, they are a marketing company and not a technology company. What that means is that they have done anything they can to "sell" the idea that their stuff is better than others and their product design most often skips quality to get the job of marketing done. For those of who have been in this business for 15-20 years, we have seen some very good ideas start to grow and then get squashed by the stranglehold Microsofts marketing and business practices put on the market.

the second big deal is that pretty much everything they do and say are lies and all about anti-competition. So instead of coming to the table with the best of what customers or developers what, they come in with crapware but spend billions putting out the word that the competition is worthless and of poor quality. And in many cases, they are actually out paying customers to use THEIR stuff in order to eliminate an income from their competitors. That's right, Microsoft pays vendors to use their stuff instead of say Linux and open source.

so stop thinking that people blindly dislike Microsoft because I don't think people just instantly dislike something. Their dislike is earned and in this case, it has been earned by over 20 years of anti-competitive business methods, illegal behavior, and a general lack of playing a competitive game.

Who likes a dictatorship because that is what Microsoft is? Did the market think MS OOXML was the best file format standard? No they didn't but Microsoft came in and gamed the ISO organization and effectively purchased their way into getting MS OOXML as an ISO standard. MS Silverlight, they are out now spending millions to pay customers to use it instead of Adobe Flash or other software. The list is long. So, do you want a dictatorship directing what the software market does? If so then you must just love Microsoft because that is how they have used their marketshare ever since IBM handed them a massive piece of the PC pie by picking MS-DOS for the IBM PC over 20 years ago. IMO

LoB

Its a beautiful day after all!

[Dana W]

Lets all say that together, shall we? "Falling Microsoft Income" Beautiful........... Do I get two more wishes?

Re:Its a beautiful day after all!

[cheater512]

What more could you wish for? :P

Re:Its a beautiful day after all!

[pandrijeczko]

Ballmer to be knocked flat in the face by a joke rubber chair that rebounds off the wall he threw it at following his hearing the news of the fall in Microsoft profits?

And losing one of his teeth in the process so that whenever he smiles in a photograph, there's a black gap? And because of the tooth he lost, he ends up with a lisp and ends up shouting "Developerth, developerth, developerth"?

Re:Its a beautiful day after all!

[Hillgiant]

Ummmm, ew?

Re:Its a beautiful day after all!

[maxume]

He's a billionaire. He can probably afford some dental work.

Re:Its a beautiful day after all!

[Dana W]

Not even if I HAD a cock! Who knows where he's been? It would be like humping a barrel of rancid pork fat. Or like being guest necrophile at the Fester Addams funeral. Brrrrrr. better you than me.

Re:Its a beautiful day after all!

[Dana W]

Nice Straw man Argument, bad anonymous troll, no biscuit. You need to do a LOT bette than that.

wrong wrong wrong*

[thermian]

It was the absurd level of investment which saw things like startups being valued higher than HP, Xerox, and if I remember rightly, the Ford Motor company, that caused that.

Venture capitalists poured billions into the industry without considering that the market had yet to produce the great new age of commerce that was promised.

Startups without a coherent product were valued as multiple million dollar companies, and attracted investment like dead dogs attract flies.

And all this at a time when I believe broadband wasn't even widely deployed.

It was a bust waiting to happen. It's just a shame that so many viable companies were taken down in the crash.

Re:wrong wrong wrong*

[lightversusdark]

Whoosh!

And don't try the old asterisk in the subject line trick - we can see you're not a subscriber!

Re:wrong wrong wrong*

[Gideon Fubar]

*woosh*

That was the stealthy sound of sandpaper-dry sarcasm whistling coarsely overhead.

You are right, though.. There was very little sanity going on there, and we all suffered because of it.

Re:wrong wrong wrong*

[encoderer]

"There was very little sanity going on there, and we all suffered because of it."

Well, many did.

Others made a killing billing obscene hourly rates.

I really can't complain too much. It's a psychological hit to go from billing $175/hr back down to $75 (and even $50 in the lowest of the lows of 2001-2) but that's fake bruised-ego pain. Not real suffering. Not suffering like a lot of Americans go thru during bubble-busts.

Re:wrong wrong wrong*

[mweather]

Speak for yourself. I sold short.

Re:wrong wrong wrong*

[Trogre]

Asterisk... subject line... subscriber... what?

The Offer is NOT LOWBALL

[SerpentMage]

If you think that Yahoo which is trading over 40 to 50 PE as lowball well then YAHOO is crazy.

Look at the earnings growth of Yahoo for the past five years. IT IS pitiful. Yahoo is being too arrogant for its own good.

Personally, I think Microsoft should just walk away. Watch that Yahoo stock drop faster than gravity.

Re:The Offer is NOT LOWBALL

[SerpentMage]

Oh yes I am paid by MS (sarcasm)... Care to show proof?

No, my side hobby is investing in the market. Yes I am long MSFT, but I am also long AAPL. I would be long GOOG, but I find GOOG a bit too opaque for my tastes. Though they are a good company.

My point is that I am looking at this deal from a financial perspective and Yahoo is an idiot...

Re:The Offer is NOT LOWBALL

[Solandri]

If you think that Yahoo which is trading over 40 to 50 PE as lowball well then YAHOO is crazy.

Look at the earnings growth of Yahoo for the past five years. IT IS pitiful. Yahoo is being too arrogant for its own good.

Over 5 years, Yahoo stock has outperformed Microsoft stock. If a Yahoo stockholder were basing his decision solely on the 5-year history, he would have to be crazy to want to trade his Yahoo shares for Microsoft shares.

Yahoo has only run into problems during the last 2 years, which is kinda short to declare the company dead. And their current P/E (with a price based on Microsoft's offer) is 35, which seems about average for most tech stocks. The day prior to Microsoft's bid, YHOO had dropped so low I was considering picking some up. I'm still kicking myself for putting off the research for a day so I could watch a movie.

Re:The Offer is NOT LOWBALL

[Chrisje]

Gravity doesn't drop. At least not in that sense of the word. :-D

Re:The Offer is NOT LOWBALL

[Yvanhoe]

There is more to it than just money. The people who founded Yahoo 13 years ago are still in for the ride. If they sell it to Microsoft, they know the adventure will end there. After all, they already are rich enough, I don't think they want more money, I think they want independence and fun.

And battling Microsoft is a fun that many people here can probably understand!

Re:The Offer is NOT LOWBALL

[Weedlekin]

"Yahoo is being too arrogant for its own good."

It could also be a matter of them really not wanting to become part of MS because they're aware of what tends to happen, or that they know how desperate Ballmer is to find some way of competing with Google, and that there aren't many companies he can buy with any realistic chance of giving them that capability.

"Personally, I think Microsoft should just walk away. Watch that Yahoo stock drop faster than gravity."

The question from Microsoft's viewpoint is whether they can afford to walk away. None of their many efforts to diversify have been particularly successful, and their monopoly position tin PC software means that they have few prospects for the growth that's so beloved of stockholders, so what options do they have besides buying up a company with a significant presence in one of the markets that their own efforts have failed in for years despite having massive amounts of money thrown at them?

Re:The Offer is NOT LOWBALL

[Wooky_linuxer]

It is not about money. Not when you are that rich anyway. It is about the vision of what your company should be. I am not saying companies do not seek revenue, but they seek it by a certain way. Publicy traded companies may give up their ways in exchange for revenue - either in the short or long term. But the founding fathers rarely do so, whether their vision is right or wrong, they tend to cling on.

Re:The Offer is NOT LOWBALL

[SerpentMage]

Huh?

http://www.cnbc.com/id/15837281?q=yhoo

Their current PE is not 35, but 52.65. Do the math 2007 earnings was 0.52, and current stock price is 27.38. That makes a PE of 52.65! WAY WAY overpriced.

Their earnings growth has typically been 50% year over year so you could argue that now is an average price. BUT here is the problem.

In the past two years their earnings has contracted, meaning that 50 PE is overvalued. And their 2008 earnings is about the same as last years. Thus their PEG is 0... In other words you are overpaying for a stock!

Yahoo is dead from a fiscal perspective! They just don't know it. Its another AOL, Netscape, etc... Need I continue?

BTW the big problem of Yahoo is that it tries to be everything to everybody and that is not what people want. If Google is an example they are a point to find things, not be things. Yahoo is a point to be things, not find things and that is wrong.

Re:The Offer is NOT LOWBALL

[SerpentMage]

Sure I agree... BUT this is a public traded company and hence they have corporate guidelines. If Yahoo were private I would not care...

Re:The Offer is NOT LOWBALL

[magus_melchior]

If YHOO goes down in flames for not taking Microsoft's offer, well, they deserve all the vitriol and litigation they're going to get.

Some companies base their decisions entirely on financial reasons, others take more risks. Unless you're a Yahoo board member or shareholder, you don't get any say in how they run the company.

Maybe you're not a MSFT shill, but your hobby is getting the better of you. Making a fuss over their earnings may be great on, say, fool.com, but here...?

Fish out of Water

[bluemetal]

It was never going to happen anyways. Together they would have created just one GARGANTUAN mess instead of two unbelievably huge messes.

It's just a couple of humongous fish desperately flapping their fins about as the water from their tanks slowly drain into more fruitful oceans.

Re:Fish out of Water

[mcsporran]

You missed the dinosaur metaphor

It's just a couple of humongous coelacanths, desperately flapping their fins about as the water from their tanks slowly drain into more fruitful oceans.

Re:Fish out of Water

[bluemetal]

Snap...

You got me there.

No seriously, that would have made it better. I agree.

Re:Fish out of Water

[pimpimpim]

Have to agree with that. As far as I like yahoo standing up for themselves, yahoo's product is hardly viable either with or without MS. I remember yahoo's horrid news group interface with ad-only pages intermitting every 5 messages or so. The only good thing about yahoo is Flickr and the only reason MS needs yahoo is to make Flickr dependent on Silverlight so that they will get a critical mass for the Silverlight userbase. MS needs to do that fast, if the growth of Silverlight is too slow web developers will just spare their time learning to use it.

In "real" money, however, both MS and yahoo are probably higher priced than their actual valuem, and the worth is more likely to go down than up.

Re:Fish out of Water

[Socguy]

Good call. Microsoft would have slowly killed Yahoo, not overnight mind you, Yahoo is far too big for that. Most companies try to focus their energy on their 'core competencies'. (Makes sense that you would spend most of your time focusing on what you do best in order to NOT kill your golden goose!) Now what is Microsoft's core competency? Well, they do a ton of things but I guess you would have to look at where they make their money: Windows/Office.

For some reason Microsoft is desperate to compete with Google in 'search.' They failed in their attempt to build their own so they figure that dropping $44B on Yahoo is a good idea. As I understand it, Yahoo's strategy is largely wrapped up in creating original content to attract users. How does any of that fit with Microsoft's core competency? If they pull off this takeover, what is going to be the priority at Microsoft? How are they going to integrate Yahoo with the rest of Microsoft? Will they shut down similar operations or will they start to compete against themselves? For the shareholders, the biggest question should be: Where is the top brass going to focus? How are they going to protect their 'Golden Goose' 'cause they can't really afford another Vista nor do they want to turn a $44B purchase into the next plays-for-sure.

Re:Fish out of Water

[mysticgoat]

It was never going to happen anyways.

Agreed. Attempting to merge these two companies would so badly mangle the infrastructures of both that they would be like discarded wreckage alongside the Information Highway. The primary benefactors of the merger would be IBM and Google.

Microsoft knows this: they would never have consummated their offer. They would have found some reason to back out when the books were opened to inspection, if not before. The whole point of this exercise has been to generate FUD and divert attention from failings of Vista and Office 2007. And to shove the Yahoo race car into the wall if possible. This has been yet another variant of the SCO approach to marketing (Microsoft buying enough licenses from SCO to keep the SCO-IBM lawsuit alive).

Yahoo is likely to have a bright future. Despite the beating they've taken in the last couple of years, they've got some very strong assets and are well diversified. They seem to be on track for finding niches where they can shine... think of the Avis' success with the "We're number 2 so We Try Harder" approach to market.

Re:Fish out of Water

[Andrewkov]

Funny you mention that. The only reason I'm interested in this story is because I'm worried what would happen to flickr. It was bad enough when Yahoo bought them, now MS might own flickr? ugh.

Chaired !!!!

[Axe4ever]

I think the sales guy who had predicted this downfall was thrown with a chair .. !!!

Re:Vista sales

[utnapistim]

I think everybody knows by now that Vista sales are not going as Microsoft initially envisioned, whatever Steve Balmer might be saying.

Re:At least I'll have my...

[PinkyDead]

Just a suggestion: http://www.pendrivelinux.com/

Offer is attractive to shareholders

[EmbeddedJanitor]

Recent economic worries tend to make people risk adverse and tends to pop the bubble of any high PE stock. Being able to trade away high PE stock for a good price gives YHOO shareholders a nice sleep and that is all that is keeping the YHOO stock from crashing.

dumb, ill-informed sarcasm

[nguy]

Why do you have to drag this bullshit sarcasm into this discussion?

For the record, both Yahoo! and Microsoft have open positions that they have a hard time filling with qualified people (so do Google, IBM, and most other high tech companies):

http://research.yahoo.com/Job_Opportunities

http://research.microsoft.com/aboutmsr/jobs/fulltime/default.aspx

The H-1b caps indiscriminately keep companies from filling those jobs; they keep out US educated Ph.D.'s, they keep out foreign educated Ph.D.'s, and they are a huge problem for industry and US competitiveness. Even if there's some abuse of H-1b's, capping H-1b's to prevent that abuse is like killing the goose that lays the golden eggs. If those Ph.D.'s can't come to the US, they work abroad and found their startups there, pay their taxes there, and create jobs there.

So, stop that stupid sarcasm and get some of the facts, OK?

Re:dumb, ill-informed sarcasm

[Anonymous Coward]

What a complete load of bull plop!

The reason they want the cap lifted is becuase the people being brought in from abroad are cheap pure and simple!

BY the way I'm live in the UK and so therefore have no agenda.

This rubbish about it stopping PHD's etc is crap. By the way if they are being bought in to fill postitons in the US, why do they need to create start ups??

Its a ruse,the high tech companies do not want to pay a decent living wage to americans, when they can hire and fire foreginers, who will also be less uppetity knowing that their green card depends upon them being employed with that company!

Re:dumb, ill-informed sarcasm

[Simon Brooke]

Why do you have to drag this bullshit sarcasm into this discussion? [scythe] So, stop that stupid sarcasm and get some of the facts, OK?

Because, outside the US of A, there are still some people who understand humour. Inside the US of A, of course, you can't even spell it.

Re:dumb, ill-informed sarcasm

[Just because I'm an]

If we're going to use such broad brushstrokes then you have to admit it's pretty funny to have someone who is (or at least appears to be) from the USA label other nationalities arrogant.

Re:dumb, ill-informed sarcasm

[Svartalf]

Heh...that's because we don't have the monopoly on arrogance; haven't for some time now. I do find it funny, though, that there's people that appear or claim to be from elsewhere resorting to such naked arrogance as the GGP post resorted to- I used to think we had the market cornered on that stuff... ;-)

Re:dumb, ill-informed sarcasm

[nguy]

also be less uppetity knowing that their green card depends upon them being employed with that company!

That's a nice theory, except green cards don't depend on the employer and never have. Even H-1b visas are employer-independent now.

Why do people like you feel compelled to comment on such a politically charged topic without even getting your facts straight?

Re:Vista sales

[Tweenk]

Vista will sell because it is forced onto unwilling customers. In Poland you almost can't buy a laptop without Vista, except budget-end ones that sometimes run "Linux" (no mention of the distro), but the more disturbing thing is that your warranty is void if you replace the OS. This means if you want to downgrade to XP you're royally screwed, because warranty is the main reason people buy in stores instead of e.g. on auction sites.

The crash is coming

[pubjames]

When Microsoft falls, it's going to fall big-time, and the size of the crash will take everyone by surprise. Microsoft is still a company with basically two extremely profitable cash cows (OS and Office) which are both under threat. Both of these huge cash flows could disappear fairly quickly. I predict their profits will stay stable or show a slight decline for two or three years, and then suddenly they'll be a huge drop in profits - perhaps a 40% drop, and then everything will go to crap for them over the following few years.

If they play their cards right over the next few years, they could prevent this happening, but unfortunately their current actions suggest they've lost the plot.

Re:The crash is coming

[Mongoose Disciple]

Microsoft is still a company with basically two extremely profitable cash cows (OS and Office) which are both under threat.


What, exactly, is a serious threat to Office? OpenOffice? IBM's new Lotus thing? I don't think so. Neither of those will be a serious threat to Office's market share in the next year or more.

Re:The crash is coming

[pubjames]

What, exactly, is a serious threat to Office?

The death of Office application suites.

Re:The crash is coming

[Mongoose Disciple]

The death of Office application suites.

That's not realistically happening anytime soon. It's just not. Few if any businesses are in a hurry to get away from them.

Further, the combination of Office 2007 and the newest version of the dev tools to go with it (VSTO 3.0) open a lot of new possibilities for what an Office suite can/should do for a business -- and what's more, a lot of these are the kinds of possibilities that play extremely well to the pointy-haired boss crowd. Once that dam breaks expect Office to be more firmly ensconced in many businesses than ever.

Re:The crash is coming

[pubjames]

Let me guess, you have some kind of vested interest in MS Office...

In case you haven't noticed, the cool developers aren't working on Windows apps any more. There's a new development platform called the web.

Sure, it's easy to laugh at stuff like Google Docs today. But that stuff is the future, and it will be the death of MS Office.

Re:The crash is coming

[EMeta]

The real threat to Office is Office 2000, which still is more than the great majority of companies need.

I work at an engineering company, and we even use Excel's programming functions regularly for project management. But we'll never upgrade to 2007. No need. Microsoft's empire was built on growth, and Office, just like XP, got to a good enough stage many years ago. They still have some opportunity in the developing world, that hasn't already bought the software, but they're built out here.

Re:The crash is coming

[Mongoose Disciple]

Let me guess, you have some kind of vested interest in MS Office...

Not so much, no.

I'm a consultant. In any given years I spend time working in the offices of a lot of different businesses. Some of these will be Fortune 500 companies, some will be medium or small. This gives me a pretty good read on where a variety of different businesses are going.

Number of these businesses going to Office 07: several. Number of these businesses even looking at making a transition to something like Google Docs: zero.

The wind just is not blowing that way yet.


In case you haven't noticed, the cool developers aren't working on Windows apps any more. There's a new development platform called the web.


You're kidding yourself if you think everything is going to the web anytime soon if ever.

8-10 years ago, sure, the web was our new messiah and everything needed to run on the web.

Flash forward to the present and people have figured out that, at least as the technologies stand for the foreseeable future, some things make sense to do as web apps, and some things don't.

(Professionally, I write both web and non-web apps, whichever is appropriate for the client's needs.)


Sure, it's easy to laugh at stuff like Google Docs today. But that stuff is the future, and it will be the death of MS Office.

I'm skeptical. If MS Office stands still, then surely something like Google Docs will overtake it for many businesses. I don't see MS as being that stupid about Office, though. They certainly aren't being that stupid about it currently.

That being said, you need to consider that because of laws like HIPAA and SarBox, some kinds of information will never be appropriate for a typical web app.

Re:The crash is coming

[JShadow]

Neither of those will be a serious threat to Office's market share in the next year or more. You're wrong. Office 2007 is a stinker for corporate use because moving to it would cause a huge hit to productivity until everyone would get over the ribbon fiasco, and many (my company included) are watching OpenOffice closely hoping to be able to move to it in the next year or so.

There's really little holding it back but a few small bugs... one being that if you open a powerpoint slide with numbered lists, OpenOffice doesn't bring in custom numbering (like if you start a list on a slide with 5 instead of 1), and resets all ordered lists to 1. I was introducing OpenOffice to my company, and they were rather pleased by it, until that little bug came up and then they pulled back from it because they use numbered lists alot in their presentations.

It's not much of a problem for most, but of course it became a show-stopper for us. I'm confident that these little things will get smoothed out in the next year. Then, unless MS releases an Office version that would allow a smooth migration of Office 2003 skills, OpenOffice is going to be it.

Until then I'm tasked with scrounging as many Office 2003 licenses I can find so we don't have to deal with Office 2007.

Re:The crash is coming

[pubjames]

Well, perhaps we have different perspectives.

A lot of my clients are fast moving technology companies and they certainly are moving many things onto the web, and that process is accelerating.

Of course big enterprises and smaller companies in slower moving industries will be the last to move. But it is only a matter of time...

Re:The crash is coming

[JShadow]

Number of these businesses going to Office 07: several. So how are they fairing? Are they more or less productive now? And of the companies you've worked for, what's the percentage of those moving to Office 07?

I'm honestly interested in the answers to the questions above, because I just can't see any real benefit to moving to Office 07 from the perspective of the worker, which is the only perspective that matters when it comes to Office suites.

The people at my corporation looked Office 07 over, even working with it a little, and I got a pretty unanimous "YUK" . These people have been using Office since Office 95/97, and they are used to the standard that Microsoft set out in Office interfaces. I really do think Office 2007 is probably technically superior, but a mouse driven interface in the workplace? I don't see how they are going to get the office worker to voluntarily (they're corporations can force them of course) give up using the keyboard and start waisting time using the mouse on the ribbon interface.

So I'm interested in hearing how other corporations are doing with using this new user interface... is it helping or hindering?

Re:The crash is coming

[Mongoose Disciple]

I'd say probably a third to half of the companies are either on 07 or have a plan in place to be in the next few months, with the rest still on 03 and with no plan to move that I'm personally aware of.

The majority of the office workers that I've interacted with have seemed to struggle with the new interface for a bit (usually around a day to a week or so) but then thereafter seem happy with it, usually finding that Office will do things for them that they didn't know it could do.

Definitely, the "power users" who actually knew the more obscure old Office functions that are useful to their job and could fire them all off from the keyboard without ever really needing the mouse are seeing the least, if any, benefit... but my experience is that this isn't most office workers. Overall productivity is probably up with 07, even though it might be in the form of ratios like 5 people with more productivity and 1 person with less.

Re:The crash is coming

[Mongoose Disciple]

Well, perhaps we have different perspectives.

We definitely do, and I'm glad to hear yours. Stuff like this is what keeps me coming back to slashdot. I see a pretty good variety of businesses in my work, but there's a lot more out there I don't see and it's interesting to hear what else is going on out there.

I think most companies at this point are using the web for some things, and not others. Some of this will definitely shift as new technology emerges (for example, ten years ago there was a pretty stark divide between the kinds of UI/user experiences you could provide in a console vs. web app, and now, much less so) and some may not.

As far as something like an Office suite, I think it depends a lot on the requirements of the business and what people are trying to get done.

If having multiple people collaborate on a document is of high importance, Google Docs is already probably a much better solution than MS Office + Sharepoint.

What if some of the documents need to have strict security or auditing requirements due to federal law? Now you're looking at Google Docs hosted locally, maybe, which you can do, but you're probably not leveraging the full promise of the web in doing it. Google Docs is still in the running there but it's not necessarily the best choice depending on what your other requirements are.

A case where I think Microsoft will gain ground, at least in the short term, is something like this:

Suppose you're dealing with a manufacturing company. They have a customer service department that processes orders. About half of these orders come in the form of a standard order form which they are e-mailed, and the other half come in the form of normal text e-mails with the order information scattered throughout in sentences. The orders get entered into something like a SAP setup. This, or something like this, is a pretty common scenario.

It's pretty trivial, now, to write a plug-in for Outlook for the customer service department that will automatically consume the standard order e-mails and use them to populate the SAP order forms, either submitting the automatically or showing them to the user for confirmation depending on how much you trust the people sending you the order forms. That eliminates a lot of human error from the process and reduces workload considerably. This is the kind of thing that a developer who knows what they're doing can realistically bang out in a day or so. Right now you can't really get something like that if you're trying to replace Outlook with GMail. (Of course, even Outlook is sort of a hybrid console/web offering these days, since there's OWA... but I'm pretty much talking about non-web Outlook here.) I wouldn't be surprised if that changes in the future, but I'm guessing we'll see a lot of Office apps of this kind written before it does.

Re:The crash is coming

[timeOday]

Will the movement to the web actually threaten the Microsoft monopoly on office apps anyways? If nobody has been able to write a good replacement for Outlook and Powerpoint until now (and no, ooimpress isn't), why will the be able to do it on the web?

Re:The crash is coming

[pubjames]

There you go - different perspectives.

Automatically processing email orders using a plug-in for Outlook is in my opinion a pretty horrible technical solution, and one I would never implement or recommend.

Much better to have an online form that people can fill in when submitting orders, which can then go directly into SAP or whatever. Including the Outlook application in such a solution is, in my opinion, a horrible hack.

Re:The crash is coming

[Mongoose Disciple]

Much better to have an online form that people can fill in when submitting orders, which can then go directly into SAP or whatever. Including the Outlook application in such a solution is, in my opinion, a horrible hack.


Thinking back on the example I gave, I can't really disagree. In part it was a little too simple, and in part... yeah, a lot of brick and mortar companies do do things in a backwards way, and are more likely to seek help automating/improving their backwards way in some small incremental way than in replacing it whole cloth. It's true, too, that for whatever reason people feel comfortable e-mailing an order for a million dollars of machine parts to a customer service representative in a way that they don't feel comfortable filling out a web form. Probably a lot of that is culture and will change, in time.

That being said, I still do think we're going to see a lot of push for integration between the Office suite (or whatever would be taking its place) and the other systems that drive the business, be they big iron mainframes or web applications. Probably half of the data crucial to the smooth running of most business currently exists in a non-formalized way in e-mails, in Word docs, in Excel spreadsheets, etc.

Just the excuse they need

[rastoboy29]

This is it, Steve, take the bone that's been thrown to you, and use it as an excuse to call the whole thing off.

I know...go buy Comcast!  That would be cool.  I think I would actually like you better as my ISP.  And that's saying something.

Re:At least I'll have my...

[pandrijeczko]

Shouldn't that be a 640Kb memory stick? Because you'll never need more than 640Kb.

Besides which, I cannot agree with your statement one bit - Microsoft makes damn good mice and joysticks!

ummmm

[oliverthered]

When I was a lad companies used to do something called training to get their employees up to scratch, Why can't Microsoft/ Yahoo/ IBM do this?

Re:ummmm

[timmarhy]

They do, grants and on the job training.

this might shock you so hold on to your strawberry daiquiri, it takes years to get enough experience to even start training at the level MS needs to hire people to stay competitive.

Re:ummmm

[oliverthered]

well they could look for people with strong experience in the industry but no a Ph.D, shouldn't take them too long to pick up the research bit if a recent graduate can complete a Ph.D course in three years.

I work with people taking their Ph.D's, I don't have a Ph.D (or any formal qualifications for that matter) but I train them and could quite easily do the research work.

But I doubt I'd make the cut because I don't have a Ph.D. on the same grain if they took someone like me on a few years ago as an employee (not doing research) and had trained them up inhouse (Like I trained myself) then they would have a reasonable number of employees without Ph.D's who could do the job. And if they can't do the job then the training isn't waisted because they can still do the job they were employed to do (either that or they should have been sacked years ago)

Re:ummmm

[rtb61]

M$'s failing is not a lack of coders or Ph.Ds it is management incompetence. Very poor business decisions and, a total disconnect from their customers. Hiring more people just means blowing more money on failed products, or just being able to produce even more bad code.

M$ failings have nothing to do with a lack of technical staff but everything to do with the Vista (P)OS, the user interface failing on Office 2007, the Zune edsel music device, pathetic xbox360 failure rates and, the failed re-branding of MSN to Live.

Basically at this stage they should not be hiring more but less. Not focusing on new OS's but on killing the failed Vista (P)OS and refining stale piss, all with more cost efficient staffing levels, that and diversifying into other technology areas. To achieve this, the first required step is to dump a tired and failed executive team who are looked into the same marketing B$ they were using a decade ago and which now is an embarrassing failure. Vista, a failure, but that OK it's only 'a work in progress', or going cap in hand to News Corp to beg for assistance in the Yahoo takeover, what a buffoon.

Re:ummmm

[sjames]

MS has been playing the vendor lock-in game since day 1. They have counted on the upgrade treadmill and market dominance to keep the cash flowing in. Unfortunately, they had serial failures to develop the next thing for the treadmill on the OS side. On the apps side, they made the last version "good enough" and competing products have become good enough as well. They keep selling Word only because OOffice is different and users don't want to learn different. Unfortunately, that means that their new (and different) Word update suffers the same drawbacks as the new (and different) Open Office AND it costs a lot more.

They are feeling the pressure on all sides, and that is causing them to desperately grab at any dirty trick they can find and use them in a rather clumsy manner.

Most companies could survive by accepting that they will have to inter-operate and either scale back or take a smaller piece of each market they play in, but they have decades of bad habits and reputation for not playing well with others working against either option.

They don't know HOW (technically or otherwise) to work and play well in a mixed shop environment. They only know how to work in an all MS everywhere shop. They don't know how to market MS apps and OS as part of a mixed environment where each part is chosen based on technical strengths.

Their own customer base is strongly attempting to give them a temporary out by convincing them not to EOL XP until they have a more creadible replacement ready, but MS may not be organiationally capable of making such a move. Doing what others want goes entirely against their grain.

The last time something like this happened to them (ME), they dodged the bullet by coming out with XP "in time". This time, they reached for the stars because they felt pressure from OSX and Linux (remember Longhorn?). Their reach greatly exceeded their grasp, leading directly to where they are now.

Windows revenue dropped 24% ??!?!!!

[jkrise]

Colour me surprised, I thought with customers buying Vista AND XP; Windows revenue should've gone up actually. Even in Vista, the numerous versions out there seem specifically designed to confuse, and increase revenues.

24% decline in revenues could mean that people are either:

1. Pirating Windows XP very easily or
2. Corporate customers buying PCs with no OS, and installing Corporate licensed XP or
3. People switching over to Macs and Linux.

I think it could be a bit of all the above. In 3 years time, if Microsoft does not release a really good successor to Vista, it could be Curtains for Windows! (TM). Will it happen?

Re:Windows revenue dropped 24% ??!?!!!

[eulernet]

Or probably, they are late with Windows Server 2008, which is an expected fat cow.

Maybe also because they invested a lot in advertising Vista. This will pay in a couple of years.

Another problem is that the OEM version of Vista is about the same price as XP, and since its development took a lot of resources, Microsoft is losing money comparatively.

Re:Windows revenue dropped 24% ??!?!!!

[jkrise]

It can't be Windows Server2008, because Server Revenues are shown separately, and they were up since 2007.

Advertising in Vista has no relations to revenues, only expenses.

As far as identical OEM pricing is concerned, I think unless Corporate customers buy PCs with NO OS at all; MS would atleast be getting the same revenue as previous years? The PC market is still growing, so a 24% drop in revenues should be really alarming for Microsoft.

Re:Windows revenue dropped 24% ??!?!!!

[iamthelaw]

No drop. It's an illusion. This quarter last year MS recognized revenue from upgrade sales of Vista that had not yet been realized. The amount of growth was normal and expected; MS met earnings expectations which accounted for the difference.

Re:Windows revenue dropped 24% ??!?!!!

[Zigurd]

This is the first indication of Microsoft actually feeling a bit of pain due to Vista.

Microsoft could afford to misspend the money it took to develop Vista. But Microsoft cannot afford to allow Windows share in the installed base to erode 10 points from the current level. Apple has already taken advantage of that opening, and Linux, mainly Ubuntu, is growing even faster, though from a such a tiny base that the statistics are iffy.

How bad would a 10% decline be? It would leave Microsoft with 80% of all personal computers that access Web sites. That doesn't seem irreversible. But it is worse than it looks for two reasons:

1. That 10% contains a large number of opinion leaders.

2. The momentum would be hard to reverse.

If a 10% decline happens in the next 18 months, before Microsoft has a response, then Microsoft will be in serious trouble.

3 years is far too long for Microsoft not to have a response. Well within 3 years we will know if we have a long-term competitive environment for personal computer OSs, possibly with new entrants other than Mac OS X and Linux.

Re:Windows revenue dropped 24% ??!?!!!

[jimicus]

1. Pirating Windows XP very easily or
2. Corporate customers buying PCs with no OS, and installing Corporate licensed XP or
3. People switching over to Macs and Linux.

I think it could be a bit of all the above. In 3 years time, if Microsoft does not release a really good successor to Vista, it could be Curtains for Windows! (TM). Will it happen? Certainly not the second one. Corporate Windows licenses are upgrade-only - you still need either a retail or an OEM license on the hardware.

I'd imagine it's a combination of a two main things:

1. Vista has few, if any, compelling features.
2. The economy isn't exactly in the healthiest of states.

This combination has businesses and individuals alike asking the question "What benefit is there to buying a [business: whole lot of] new PCs rather than just adopting a policy of replace when broken and not before?". And the answer coming back is "Errr.... none".

Re:Windows revenue dropped 24% ??!?!!!

[UnknowingFool]

1. Pirating Windows XP very easily or
2. Corporate customers buying PCs with no OS, and installing Corporate licensed XP or
3. People switching over to Macs and Linux.

Some other reasons:

1. Fewer people are buying PCs (maybe due to the recession). OEM Vista revenue is hurt.
2. Fewer people are upgrading to Vista. Again, the recession could have a factor here. Also, businesses and consumers who were interested in upgrading are probably waiting for SP1 which was released after the quarter ended.

I found interesting that MS general administrative expenses rose $1.36 billion. I couldn't find an explanation for it though.

Re:Windows revenue dropped 24% ??!?!!!

[Dan Ost]

Perhaps they had to lower their prices some to get Vista going. Or maybe people aren't upgrading to newer machines as fast as they used to.

I think you hit the nail on the head.

Re:Windows revenue dropped 24% ??!?!!!

[cmacb]

Here is my theory, just based on personal experience, with no hard facts (but some rationales) to back it up:

Companies know more about their revenue sources than they are required to report. FASB rules require them to be consistent about how they report, but they are also allowed to change how they report from time to time. You can "book" revenue from a sale immediately, or spread it out over time, or put it off until all product is delivered if you want.

In the 2000 time-frame I worked for a large organization that signed a volume purchase agreement (VPA) with Microsoft. I don't know when MS started using these VPAs, but I do remember reading that they changed the way they "booked" them about that time too.

I remember us having to come up with a count, which was really an estimate, of how many Windows PCs we had. I know the count was more of a wild ass guess than it was a count, and the count was rounded up to satisfy MS and (theoretically) get a lower unit cost.

We were running 2000, and nowhere near ready to convert to XP, so in effect, we were paying a second time for software we already had. No worry though, says MS, the contract includes an upgrade to XP, whenever you decided to do it, that is, as long as it is within five years, after which you do another VPA. Do I have to spell out the rest of the story?

My guess is that the number of deals such as this is large (the entire Federal government agency by agency for a start) and when MS makes claims about the number of 2000, or XP, or Vista licenses out there it's all accounting tricks, after all, we didn't get an actual copy of any MS products for each machine we ran. Instead we installed off the net, or from copies of copies of copies of the original disks. No need to mess with those fancy laser printed product keys.

Yes, there was a costs "savings" for these VPAs, but the savings failed to take into account that fact that the machines were purchased with Windows already installed, previous licenses had paid for the software again, VPA1 had paid again, and VPA2 paid yet a fourth time. The savings MIGHT materialize if there were more frequent product releases from Microsoft (but guess who controls that) and only then only if the customer were able to upgrade almost immediately (something the technical people know wasn't going to happen, but then the company/government negotiators are not generally technical people).

So, when MS does their quarterly reports on how many licenses of various products they have sold I figure they are about as accurate as a weather forecast for this day next month.

The difference between these "booked" numbers and what MS deposits into the bank every quarter gives them a lot of room to paint a rosy picture when things are dropping off. If that is the case, and they make subsequent cuts or change their business in some drastic way those ruts in income stream can be smoothed out and the problem resolved without stockholders ever noticing.

Of course these book-cooking operations can't cure a monotonically decreasing income picture. The actions you have to take in the background get more and more drastic. MS COULD use the billions they have in the bank to pay off any shortfalls they have, but that doesn't impress the stock market. If instead, you do something to drastically change the way you keep your books, say merge with another large company, spend most of your cash, stock swaps, redundancy layoffs... Some of these actions MAY actually improve your picture, but even if they don't you get an excellent opportunity to obscure the picture even further and a chance to promise shareholders that once the merger costs are absorbed, things will be wonderful again.

That's what I think is going on here, and because I think Yahoo has been playing similar games, no matter if the merger goes through or not, both companies are going to face dismal futures unless they make ACTUAL changes to their business models rather than superficial ones. (And did mention the long term costs of ignoring your customers actual needs while you tinkered with your company spreadsheets?)

I think the rel="nofollow" covers that, no?

[Mathinker]

If I am not mistaken, the fact that the "a" tag includes rel="nofollow" means that the link destination won't get any extra Google-karma...

Re:At least I'll have my...

[Keeper Of Keys]

Yeah, I have a Microsoft Sound System 80 at home which produces good quality sound at astonishingly high volumes. (But all my HID devices are Logitech..)

Revenue from Windows down?

[MMC Monster]

Why isn't this a news article by itself?

Why is Windows revenue down? What was the official reason, and official response?

Is this a normal dip that happens this time of year? Are they blaming the recession? Are they expecting an upswing in the next quarter?

Re:Revenue from Windows down?

[X3J11]

Why isn't this a news article by itself?

Why is Windows revenue down? What was the official reason, and official response?

Is this a normal dip that happens this time of year? Are they blaming the recession? Are they expecting an upswing in the next quarter?

Are you serious? Or have you missed the many articles ridiculing Windows Vista?

This ain't news, it's common knowledge.

Protip: Google Search.

Re:Revenue from Windows down?

[MMC Monster]

I'm serious. It's one thing for us to say that Vista doesn't sell, another thing for Dell to say that they are offering WinXP on many systems.

It's another thing entirely for Microsoft to say that OS sales (presumably XP+Vista+CE) are down.

My guess is recession + mature market where users don't have the push to upgrade systems, but I was wondering if there are other insights into what's going on.

Re:Revenue from Windows down?

[VertigoAce]

In November & December 2006, we deferred $1.67 billion in revenue for Windows Vista and Office 2007 into the 3rd quarter. This makes it hard to compare 2nd & 3rd quarters year over year, unless you look at it with the revenue moved back to the 2nd quarter. Once you take this into account, the results for this quarter were roughly what you would expect.

Re:Revenue from Windows down?

[UnknowingFool]

All comparisons are made against the same period last year (3Q 2008 vs 3Q 2007) for clearer analysis. This would remove any normal changes that tend to happen annually.

Re:Revenue from Windows down?

[revscat]

Everyone has an opinion on this, but the consensus seems to be that Vista is a huge dud. Part of Microsoft's decline can be attributed to an economy that has slowed, but the fact remains that consumers are rejecting Vista in large numbers. Also, while Microsoft's revenue from Windows (and I believe Office) was down significantly, Apple's revenue was up 46%. People are spending money on computers, not just on Microsoft like they once did.

Check out this entry from the New York Times tech blog, and specifically the comments people left on it. It's interesting because the comments are from a fairly wide variety of people: stay at home moms, programmers, help desk staff, retired people, etc.

If I were in marketing at Microsoft I wouldn't have been able to sleep after having read that. And it's not like this is isolated: Vista has been almost universally panned by consumers. And not just panned: people are *pissed off*.

A company name right on the mark:

[thrill12]

... I guess "Yahoo" never imagined that their name would once be yelled out so loud, when the hostile bid by MS on their company failed...

Yaaaaaaahoooooooooooooo!

Misattributed comment is misattributed

[X3J11]

Shouldn't that be a 640Kb memory stick? Because you'll never need more than 640Kb.

* 640K ought to be enough for anybody.

Often attributed to Gates in 1981. Gates considered the IBM PC's 640kB program memory a significant breakthrough over 8-bit systems that were typically limited to 64kB, but he has denied making this remark.

"I've said some stupid things and some wrong things, but not that. No one involved in computers would ever say that a certain amount of memory is enough for all time... I keep bumping into that silly quotation attributed to me that says 640K of memory is enough. There's never a citation; the quotation just floats like a rumor, repeated again and again."

http://en.wikiquote.org/wiki/Bill_Gates, scroll on down to the Misattributed section.

Re:Misattributed comment is misattributed

[nschubach]

Bill Clinton "didn't inhale" or "have sexual relations with that woman" either.

Re:Misattributed comment is misattributed

[Almahtar]

he has denied making this remark. He also "didn't recall" making a lot of statements he made in the Halloween documents in his court deposition. If he'll say that under oath there's no reason to trust his self commentary when not under oath.

Re:Misattributed comment is misattributed

[calebt3]

Or you could click the link in the TOC and give us that URL

Revised Figures

[Linker3000]

...and in late breaking news, Microsoft has reexamined their P/L Excel Spreadsheet and announced that the averaged annual profit level of $771M across their 85 Group Companies may actually be overstated at $100000M and should be nearer $65535M

Re:At least I'll have my...

[Jesus_666]

Their wireless routers were crap, though.

Re:At least I'll have my...

[cp.tar]

Besides which, I cannot agree with your statement one bit - Microsoft makes damn good mice and joysticks!

Microsoft used to make damn good mice and keyboards. I don't know about joysticks.
However, the new Microsoft mice and keyboards that I've tried out are not that good, really.

You know the economy is bad...

[192939495969798999]

The economy must be bad if this story doesn't even get a "haha" tag.

Apple sales are up

[flyingfsck]

Apple sales are up and Asus alone, sells more Linux machines than Apple sells Macs. So clearly the Linux desktop market is booming. I won't be surprised if Apple and Linux combined has 30% of world desktop sales this year.

However, in North America technology is always lagging the rest of the world, so you likely won't notice anything there for the next 5 years.

Re:Apple sales are up

[revscat]

Apple sales are up and Asus alone, sells more Linux machines than Apple sells Macs.

You keep saying this. It wasn't true then, it's not true now. Apple sold 1.4 million portables in Q2 2008, Asus sold 350,000.

Quit lying.

Re:Apple sales are up

[Dan Ost]

Could you please post links to the sales figures you're referring to?

Thanks.

It's a bit more ugly than that, methinks

[cheros]

1. MS management sees this figures early. This decline must have been known for months, we just get the bit they can no longer hide. So there may be more we (and shareholders) don't know about.

2. This decline has been registered despite extra sales of Windows XP that people bought before MS "fixed" the issue by allowing XP licenses in parallel with Vista (only Pro versions). To clarify, Many new PCs have forced us to pay the Vista tax, and early adopters/sufferers paid for an XP license on top. Sales, however, are still down - which makes me wonder how much of that loss is due to Office.

3. The shareholders have picked up on it as the share price has dropped.

IMHO this would be an EXCELLENT time for the EU to reveal a new prosecution. With nervous shareholders this could trigger problems for MS market value..

Re:It's a bit more ugly than that, methinks

[cheros]

Meanwhile I had some more coffee and got back to the original article.

I don't know how they can clock up a 24% loss with Windows, which is much more "automatically" sold than Office. Something doesn't add up here (pardon the pun).. Maybe using those flawed OOXML math interpretations on an old system with the Intel FPU bug?

I bet it said "Vista capable" :-).

I really wouldn't worry..

[encoderer]

Currencies are SUPPOSED to fluctuate. It's healthy. Like a forest fire. Recessions, too, for that matter.

The weak companies can burn to the ground to un-clutter their marketspace and allow healthy, new companies to grow in their wake.

The strong dollar led to rampant outsourcing in the late 90's/early 00's.

The US was an expensive place to do business.

As the dollar weakens, the US becomes more and more attractive for foreign investment. European companies (like Volkswagen, for example) see a supremely talented labor force with an exchange rate that's to die for. And we have indeed begun to see in-sourcing.

As this happens, the US economy gradually strengthens, the currency rebounds to the point where the country is no longer attracting foreign investment. Outsourcing begins to look more attractive for American companies. Etc. The pendulum swings again.

The sky is not falling. It's just that the tide is turning. It'll come back in again shortly.

Re:I really wouldn't worry..

[pubjames]

It's not healthy. Healthy is a strong, stable economy with a strong, stable currency. The dollar is dropping like a stone. This has lots of negative consequences, which far out-way the benefits.

The fact that European companies find it cheaper to employ people in the USA than other countries is not a good thing. The ability to outsource to other countries where labour is cheaper is a sign of economic strength, not weakness.

Re:I really wouldn't worry..

[encoderer]

Economies and currencies are not static. Never have been, never will, and never SHOULD be.

Sure, as a currency reaches the extremes (both high and low) of its value, some people are hurt by that economically speaking.

But that's the point of a personal and social safety net.

I mean, the notion that a currency should be static just makes no sense whatsoever. A currency is essentially a "score" of the performance of a given economy. When an economy is strong, when growth prospects are strong, the currency is strong. This is because people are buying Dollars as it appears that they will increase in value.

If economies were static, currencies would be, too.

I tried to write an exmaple, but it's so inane that it's a waste of our time. There are about a trillion reasons why economies are not static. Changes in technology, demographics, natural disaster, man-made disaster, resources, etc.

This is going to be a rough patch for our economy. For most, the answer is that you should curtail spending NOW and give yourself some cushion. For some, it will mean outright financial ruin. That is unfortunate. But also, unavoidable.

* The Yuan is technically pegged to a "basket" of currencies but it's remained relatively inline with the Chinese-desired 8.2765:1 ratio for an awful long time.

Re:I really wouldn't worry..

[Burz]

As the dollar weakens, the US becomes more and more attractive for foreign investment. The US was already on its way to pauperization through foreign investment. If the rest of the planet invests even more (presumably with dollars they are eager to get rid of) then inflation would run rampant and things become too expensive for the locals.

As much as I like the sound of your wildfire analogy, its much more serious than that. You can't motivate people in a purely capitalist society without a stable currency that engenders trust. That is what we are facing: a profound breakdown of confidence and trust.

Re:I really wouldn't worry..

[pubjames]

Of course currencies and economies are never static, but I never used that word, I used the word "stable". All governments aim for strong, stable currencies. If you get huge fluctuations over relatively short periods of time, then something is very wrong.

Re:I really wouldn't worry..

[encoderer]

Even then it isn't that simple.

Again, take China.

If they stopped their artificial manipulation (like the US and EU would like), there's no doubt that the Yuan would increase in value. Maybe even dramatically. And not instantly, but over a couple years time.

It's a bit tortured, but a decent sports analogy would be the team that purposely loses game after game after game in order to win some excellent draft spots.

But in China it's not JUST about future gains, it's also about social engineering. Among other things, keeping currency low provides an incentive for most Chinese to stay in China for vacations or even emigration.

Re:I really wouldn't worry..

[LordVader717]

Fluctuating exchange rates undermine the very point of having a currency. What business needs is a stable, predictable and universal measure for value, and that's why we have currencies. Having the underlying basis of a global eceonomy fluctuate depending on the whim of bankers and gamblers has absolutely no value whatsoever.
Currency fluctuations certainly cause short term stress and relief for exporting businesses, but in the long term nobody has anything to gain.

And it has been shown time and time again that exchange rates don't always "fluctuate" (meaning always going up and down but staying the same on avrage), they can permanently migrate to different ratios. They're anything from predicatble.

Falling income, heh?

[Spy der Mann]

Now here's a twist.

Yahoo offers to buy Microsoft! :D

Re:Vista sales

[grub]

This means if you want to downgrade to XP

I know a few people who have done this, having a machine that works as they want hardly seems like a downgrade, it's more like a usability upgrade.

Re:Nope

[Svartalf]

This depends on how LONG it lasts or if they don't get the Yahoo! bid. If it goes much longer or they miss on what's effectively a hostile takeover of another company- the stock market, whose majority are comprised really of daytraders, will show how really fickle they really are and paste them further on their stock price- if it goes too shallow, they lose their edge in that area and can't keep funneling money into things like they do. This isn't helping them at all and it's not as rosy as you're making it out to be.

Re:At least I'll have my...

[ronocdh]

Microsoft makes damn good mice and joysticks!

I believe that the Explorer mice etc. are in fact manufactured by HP. I cannot find a damn thing to support this belief, however, so don't bother modding me informative.

Mising option: recession buying

[je ne sais quoi]

It could also be that the recession is making people buy less new computers. I suppose you'd have to look at overall desktop sales. According to this, growth in U.S. sales were down to +3.5% last quarter (yes still growing, but growth is slow), but worldwide growth in PC sales are still up. So I suppose there's some truth in the people are switching to alternate OSes argument or installing corporate licenses.

Re:Nope

[timeOday]

But it's not true. Microsoft is still raking in massive piles of money. It's a recession, and the pile is slightly less massive than last year's. Hardly time for them to panic (or the rest of us, to rejoice). But I don't see how they could be all that reliant on the markets when their products bring in so much cash.

Easy

[Godji]

This is very easy to fix! Put a "PayPal: Donate now!" button on the WGA notification pop-up. There ya go, fixed.

funny?

[m2943]

How is this "funny"?

H1b limits mean that US-educated students have to leave rather than stay in the US and contribute. They mean that PhDs that companies desperately want to hire have to wait sometimes for years to come to the US and often just give up.

Microsoft has R&D labs in India, China, and most of Europe. If they can't bring people to the US on H1b's, they are just going to move more and more of their operations overseas. How is that going to give any US engineer a job? How is that good for the US?

Your posting is sad, not funny, and it's even sadder that you don't understand why.

Re:funny?

[Baldrson]

Totally agree, dude. Its a mystery how stupid inbred 'mercunz ever got by before the Immigration and Nationality Act of 1965.

Re:At least I'll have my...

[Rayban]

Yup - two dead Microsoft mice in just over a year for me. I'm giving Logitech a chance to win back my business now.

Re:At least I'll have my...

[cp.tar]

Yup - two dead Microsoft mice in just over a year for me. I'm giving Logitech a chance to win back my business now.

Now, my MX-1000 died on me last year. Middle click stopped working, to be more exact.
So the nice people from Logitech sent me an MX Revolution.

As you can imagine, there are no hard feelings whatsoever.

Re:At least I'll have my...

[RobertM1968]

Microsoft used to make damn good mice and keyboards. I don't know about joysticks.

You're (kinda) right... MS used to have others make (and brand in their name) good mice and keyboards for them (some were Logitechs, btw).

Of course, MS also "made" the xBox... just depends on the definition of the word "make"...

However, the new Microsoft mice and keyboards that I've tried out are not that good, really.

I wonder who is making them these days - or if MS finally took over that chore?

Re:At least I'll have my...

[Trogre]

Ugh. Just don't let that S plus ark (or is it Stark) guy and his, ahem, unfortunate designs near the MS drawing boards again.

I saw one on a desk a couple years back and couldn't help thinking (in a Mike Myers voice) "... and unfortunately my mouse does look like a ..."