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Why Yahoo Turned Microsoft Down
quarterbuck writes "The NYTimes has up a great blog post that explains a bit of the backstory behind the Yahoo-Microsoft No-deal. While Jerry Yang did not want to sell the company, it is not likely that he could have said No to Microsoft, and explained it to shareholders, without the help of Google. The article gives reasons behind Google's tossing a lifeline to its biggest competitor, and the 'coop-etition' that has been going on between the two companies, which both emerged out of Stanford University."
of chairs.
Hail Eris, full of mischief...
E pluribus sanguinem
If Yahoo's stock price continues to decline, MS has intelligently kept their offer "on the table".
If stockholders come to MS for a bailout of their capital, they don't even need a hostile takeover -- it will be a willing one. And the profits Yahoo posts from Google won't reflect in their stock price for a while.
We'll see how long it takes Yahoo investors to either let the company rebound, or to bail themselves out. Yang is in an interesting position, that's all I can say.
The price is always right if someone else is paying.
That's funny because I made a small fortune on the Google IPO. I sold and put it into safer investments since that time and don't regret it, however. I think it's way overvalued at the present time but I was happy to take my profits and run.
your shareholders are gonna grill ya like a barbecue
Only together can they defeat Microsoft, and rule the world as a monopoly so strong that even God will fall to his knees before them!
SJW: Someone who has run out of real oppression, and has to fake it.
Why google helped yahoo? Because it tries to "do no evil". And microsoft is bigger competitor than yahoo (would be even bigger WITH yahoo).
Extreme Programming - Redundant Array of Inexpensive Developers
I wonder if Ballmer is going to "Fucking Kill" Yahoo now?
Freedom would be not to choose between black and white but to abjure such prescribed choices. -Theodor Adorno
Giving a direct competitor a life line as to avoid the Goliath the merger would become while meanwhile stagnating the competitor.
Wow, I don't think I'd want to be in THAT risk assessment meeting. Then again, they did it for ASK.com and apparently it's working there too.
Competition leads to innovation
Ask not what you can do for your country. Ask what your country did to you
1. Microsoft probably can and will figure out a way to eventually stack the board of in directors in their favor at Yahoo. Microsoft has time, Yahoo doesn't.
2. Google is keeping their enemies closer at this point. This is basically a white-knight move on Google's part to keep Microsoft out of their space at all costs. The question to Google is how long will it be until this kind of action starts affecting their bottom line numbers.
In a very heartless way, I'm all for the Microsoft->Yahoo acquisition. Most acquisitions fail to generate anything near the claims management makes. Microsoft would simply leave the door open for ex-Yahoo employees to startup things that would be a bigger thorn in Microsoft's side.
Death by thousands of thorns if you will pardon the pun.
http://www.maxineudall.com/2010/02/should-economists-be-sued-for-malpractice.html
That's really the crux of all of this. The fact that the founders of both went to Stanford is hard proof of what I've always said: they are all part of a secret railroad monopoly plan hatched by Leland Stanford in the 1800s.
That's why he orchestrated the Hoover presidency and built the linear accelerator facility, which looks like the all-seeing eye when seen from the air. Google is really just a corporate front for the Stanford band, whose shadowy aim is to take over the world from their trailer, where Leland Stanford is kept cryogenically frozen!
The world, I say!
Yang didn't want to have to shake hands with Ballmer.
RutSum.com
MS's stock has been headed down, and will continue to do so. Selling Yahoo stock for MS stock would be like abandoning a seemingly good row boat for a sinking yacht, and leaving the row boat in the path of the yacht to get smashed. MS doesn't know what to do with Yahoo. If they did they could and would have done it without Yahoo a long time ago. If they do acquire them at some point it's going to become more of a mess than it already is and all of the value that it does have will be squandered.
Managing a company is also supposed to take care of it in the long run. Making one small onetime financial income at the expense of the company isnt god for the shareholders that are in it for the longer run. You are talking about day-traders and not real investors. A marriage with Microsoft would most surely spell certain doom for Yahoo as a company.
Its also not sure a Microsoft would be allowed to use its monopoly money from the Windows division to create another monopoly in search further on. Google buying Yahoo on the other hand shouldnt be a problem since its only when you use your monopoly in a bad way that US laws come into action or if you use one monopoly to subside taking over an adjecent market.
Shareholder value is not equal to stock value, its about what the company does in the longer run. Stock value is often completely useless as a measurement for how well a company is doing. Look at how long SCO had roaring high stock value? Was their moves good for their shareholders, except for hedgefunds and daytraders and other scum?
Yahoo has acted to continue living and not being bought up and then dismantled quickly after being gutted of its users. A shareholder cant just sue because its board do not favour short onetime gains at the expence of the companys future. If that was the case we would see companys gutting themselves and selling the pieces and totally disregard any possible future incomes down the line from products not yet released to the market.
HTTP/1.1 400
Any negotiations that Yahoo's board entered into were done in bad faith and in violation of the board's obligations to the shareholders that elected it.
What obligation is that? Is the board obligated to make a deal with Microsoft? Are they obligated to engage in a good faith negotiation with them?
You'd have to show that rejecting Microsoft's unsolicited bid was not in the best interests of Yahoo's shareholders. That may seem obvious to you now, but only time will tell. If they did negotiate in bad-faith, that is an affront to Microsoft, sure... but not grounds for a shareholder action per se. Keep in mind that they were responding to an unsolicited and unwelcome bid.
Jerry's sentiment was that he mismanaged Yahoo into it's present situation, and he would prefer to mismanage Yahoo out of it all by himself.
Exactly! Google understand this. Innovation is the future, buying old already established businesses is not
IMHO, The interesting thing is that this was such a dumb idea that even greedy investors did not seem to want it. As soon as the buyout was proposed, MSFT stock tanked well over 10%. It regained some in the weeks after, but the biggest gain occurred when it looked like the deal would go bad, and when it became clear that Balmer was going to do the damn fool thing, the stock tanked again. Not a rousing endorsement that this deal would do anything positive. On the Yahoo side, the stock briefly spiked as some investors were looking for a quick payday, and others were looking to get rid of an investment they perhaps paid too much for, but no on really seemed to think it was a good deal as even when it seemed like MSFT might raise the bid to $37, the stock never went above $29, which seemed to indicate that investors seemed to think of this as a windfall and not a long term thing. Of course, the most interesting thing, is that while MSFT stock has not recovered, yahoo has not fallen back anywhere near the january lows.
As I see it, Microsoft was simply willing to burn some money to get some experience in a field that they are flailing in, and to knock out the competition. It was not a growth strategy, simply a way to tread water. Given that MSFT is still perhpas 20% down on the year, while yahoo is somewhat in positive territory, i imagine that this act of desperation has done more harm than good.
"She's a scientist and a lesbian. She's not going to let it slide." Orphan Black
I would have posted:
http://finance.yahoo.com/q/bc?s=YHOO&t=my&l=on&z=m&q=l&c=msft
to make his point (a point I disagree with.) Stock price (at least in this case) in no way shows "profit" then again I don't know how to get that graph in 5 minutes or less.
I was going to hop on that bandwagon but I think I'm going to hold for a couple weeks. I feel a big announcement coming soon and I want to let the current holders fester scared first before I grab their goods at a lower price.
*sigh* I love capitalism!
If Yahoo's stock price continues to decline, MS has intelligently kept their offer "on the table".
When you posted, and currently, YHOO is up $1.35 for the day to $25.70 or so.
As another poster noted, that is well above the $18 or so YHOO started at before the Microsoft offer.
YHOO is doing just fine...
"There is more worth loving than we have strength to love." - Brian Jay Stanley
OTOH, I never felt that Microsoft was acting in good faith in making the offer.
The FUD and distraction that this offer has caused Yahoo has been all to Microsoft's benefit, but completing a deal with Yahoo would mean merging two very different corporate cultures at a time when neither company is robust. Not good. A sure recipe for loss of market cap, and usually results in ousting the CEO. Ballmer isn't that stupid.
If Yahoo who had said yes to the deal, Microsoft would have found some reason for withdrawing the offer. Preferably after they had gotten a peek at Yahoo's books.
...to be in the (hopefully chairless) room when Ballmer heard this news. The look on his face must have been priceless. Google is playing Chess, while Ballmer can barely handle checkers.
Insightful and funny are really the same thing, except one has a punch line.
All the analysis I've read is just nonsense. Google knows something that Microsoft and business analysts don't have a clue about.
A thriving market place makes a lot of money for everyone, yourself included. You have a vested interest in maintaining the market place.
The loss of a major fair playing competitor and the introduction of a stronger destruction driven monopolist makes it harder for everyone, including Google, to make money.
Google wants yahoo in place. They make money from Yahoo. Yahoo wants google in place, they make money with google. Where their businesses do not conflict, they work together. Both Yahoo and Google aren't fighting to destroy one another, they are in business to make money. It is friendly and profitable competition. They way it should be. The that capitalism works best.
Microsoft on the other hand can not compete on a fair market. They never have and never will be able. They must capitalize on their illegally maintained windows and office monopoly to destroy competition and destroy the marketplace leaving only enough business for themselves.
Google is a strong competitor, I don't "trust" them per se'. for The time being, however, they've shown that they understand ethics and the phrase "a rising tide lifts all boats."
Exactly! Google understand this. Innovation is the future, buying old already established businesses is not
Well, no. Basically everyone big in the industry, including both Google and Yahoo!, also buys successful companies to replace their homegrown failing offerings in the same space. Without even leaving the fairly narrow field of online video offerings, I give you Exhibit A: YouTube. Exhibit B: JumpCut.
NO! Who the hell invests their money for anything other than a nice stock price and/or dividend? If I am a Yahoo investor, and Microsoft offers to buy my shares at a nice premium over the market price, then yes I would like to sell them the shares.
Do you honestly expect Yahoo stock to hit the price MS was offering in a reasonable amount of time? I doubt it, the way that Google is dancing rings around them.
The enemy of my enemy is my friend
No wonder Ballmer hates Google. Stanford 2, Harvard 0. Wonder how far the chair flew this time. Maybe Ballmer should talk to the X Prize peole.
...when it was revealed Ballmer would chair the meeting
"We live in a global world" - Harvey Pitt, former Securities and Exchange Commission Chairman
... you don't care about the share price.
If you do care so much about the share price, you are an speculator.
IANAL but write like a drunk one.
It hasn't been all peaches and cream for the Wii.
Wii, though less technologically advanced than Microsoft's Xbox 360 or Sony's PlayStation 3, continues to outsell those machines and is now in more than 20 million homes.
So why are retailers having so much trouble selling Wii games?
Take Super Smash Bros. Brawl. It was one the most hotly anticipated video games of the year; it sold more than 1.4 million copies during the first week of its release.
But sales dropped more than 90 percent over the first four weeks.
A number of games that garnered critical acclaim in recent months, notably the cartoonish action-adventure game Zack & Wiki and the off-kilter action-adventure No More Heroes, have yielded disappointing sales.
Over the first three months of the year, only three other Wii titles broke the list of top 10 best-selling games.
Younger children, women and older consumers, who historically have not been sought by the video-game industry, have discovered video games through the Wii -- just not that many of them.
These new gamers are content with the games they have, often going no further than the Wii Sports game that comes with the machine. They don't buy new games with the fervor of a traditional gamer who is constantly seeking new stimulation.
The average Wii owner buys only 3.7 games a year, compared with 4.7 for Xbox 360 owners and 4.6 for PlayStation 3 owners.
"When you make a game like Zack & Wiki or Boogie, which turns the hard core off and doesn't reach the masses, then you're in trouble."
Wii Fit, an exercise game due next month, is expected to receive more marketing dollars than any game in Nintendo's history -- and the money will not be spent wooing young men. "Wii Fit is just not aimed at hard-core gamers. It's definitely aimed at the Oprah crowd. I bet they sell a million units a week for every pound that Oprah says she lost on it."
New Wii Games Find a Big (but Stingy) Audience [April 21, 2008]
Eric Jackson, president of Ironfire Capital, is trying to recruit an alternate slate of directors to present at Yahoo's annual meeting on July 3."We are hoping to turn that (meeting) into 'Independence Day' for Yahoo's shareholders."
Yahoo's board wanted $37 per share -- a price that the company's stock hasn't reached in more than two years.
"It's hard to believe the board could let this happen," Jackson said. "I think they completely misconstrued the situation and thought, 'Microsoft is rich, so let's soak them.' They were bluffing all the way and got caught."
The possibility of revived talks helped lift Yahoo shares by $1.35, or 5.5 percent, to finish Tuesday at $25.72. That left Yahoo's market value more than $10 billion below Ballmer's last offer.
Although he only owns 96 Yahoo shares, a sliver of the roughly 1.4 billion outstanding, Jackson has experience rallying stockholders around a common cause.
Jackson spent several months leading up to last year's annual meeting organizing an online protest against Yahoo's Terry Semel, the CEO at the time. The crusade culminated at the annual meeting, where Jackson confronted Semel and asked the CEO if he still had enough "fire in his belly" to do his job. Semel resigned six days later and was replaced by Yang. Jackson's latest revolt may find two powerful allies in Yahoo's two largest shareholders, Capital Research Global Investors and Legg Mason, whose portfolio managers have both publicly expressed their disappointment with the Yahoo board's demand for $37 per share.
Already, Yahoo stockholders with about 3 million shares have pledged to support Jackson's attempt to replace the board. Yahoo board may face shareholder mutiny at annual meeting
on the internet. big buck corporations with past century's mindset have been dominating everything for way too long. sorry ms fanboiz, but your ms is also one of the corporations that was founded and living on the late 19th and early 20th century big buck mindset. and these companies DO pull a lot of sh@tty stunt, regardless of anything, anyone, to increase their profits. they dont even care for their own customer base, as you can see from the games that are being played in u.s. senate in the recent years - all to the detriment of people, to benefit of them, including trying to abolish net neutrality to immunity for telcos.
it was about time the 'good guys', the companies that are founded on the new, up and coming understanding of the internet age and people had started acting up and standing up. this, was the kind of thing we needed to see all along - pulling a stunt against big buck. even though corporations they may be, in their own right, these two (google and yahoo) are much more the 'people's kind' of corporation than microsoft, at&t, comcast and whatever old big monolithic bastardly hunks of corporations can be.
now, if only those 'new guys' had today's understanding and preemptive mindset since 3-4 years ago, we wouldnt ever risk network neutrality going down the drain, or wouldnt have telco immunity sh@t at our door today.
Read radical news here
Yes, actually they are obligated to do so under Delaware law, the state in which Yahoo is incorporated. Here's a post I did earlier explaining a board's duty to shareholders during takeovers. Link.
The sun beams down on a brand new day, No more welfare tax to pay, Unsightly slums gone up in flashing light...
Yes, that is true, but as a public company the company's board of directors also has an obligation to maximize shareholder value and look out for their bests interest. To justify a $37 share price (102% higher than the 18.50 it was trading at before the offer), Yahoo would basically have had to double its net income (i.e., profits).
The company's management has a good case for turning down the offer if they can give a plan on how to do this. They haven't offered one up, and instead have entered into arrangements that that might harm the company's earnings potential long term. How are the company's shareholder's going to benefit by the board's actions?
Justice would never approve the deal. Anti-trust law is just as much preventative as it is punitive, thus the government has an obligation to look out for potentially harmful monopolies under current anti-trust law as it has an obligation to prosecute and regulator already harmful monopolies. It took the DOJ almost a year to approve the XM-Sirius merger, and just about the same time to approve Doubleclick and Google. Those transactions aren't nearly as anti-competitive as a Google-Yahoo one, which would give the combined company over 90% of all search traffic (and resulting revenue) on the internet.
If the board acts in a way that breaches the shareholders' fiduciary duty they can indeed sue the board for damages, and there are plenty of instances of conduct here that are at least borderline, if not actual breaches of duty. Even with that, the shareholders can always vote the board out, and I wouldn't be surprised if this is what happens at the July shareholder's meeting.
The sun beams down on a brand new day, No more welfare tax to pay, Unsightly slums gone up in flashing light...
It's funny how MS-bashers have created such a finely-honed and specific definition of "monopoly" that it only applies to Microsoft, as if no other company can be evil but them.
Speaking of MS bashers, I think it's funny the first post ranting about Microsoft and monopolies is yours.
FalconShould there be a Law?
It's only dead-cat-bounced about 10%, if I'm not mistaken. That's nothing to sneeze at, but you'd have to buy a ton of it to make a fortune.
...wearing a skin-tight topless leather jumpsuit, with cutaway buttocks and transparent crotch panel.
I do not (and never have believed) that Jerry Yang and the rest of the Yahoo board was ever were serious about selling the company.
First there were no negotiations, Microsoft simply extended an offer which the Yahoo! board turned down.
For example, look at the actions the board and management took right after the offer was announced.
The board didn't want to be eaten so they took steps they thought would slow down an acquirer.
They enacted huge employee termination compensation plans, including golden parachutes for management.
That's standard practice in business, and has been for a long tyme businesswise.
They tried to make a deal to acquire a portion of AOL
Citation please.
FalconShould there be a Law?
Yahoo is worth a lot to Microsoft and Google knows this. In a few years most people will have a small terminal with a free (linux) bootstrap OS to get them connected to the Internet. All apps and storage will take place there. Microsoft's entire business is about to go away. Google is already heading in this direction and Yahoo is the only other possibility for MS to get a foothold. The Internet is going to become a mainframe for everyone and who controls the apps you use and the storage you get will be very rich and powerful.
NO! Who the hell invests their money for anything other than a nice stock price and/or dividend?
Warren Buffet "chooses stocks solely on the basis of their overall potential as a company - he looks at each as a whole."
Do you honestly expect Yahoo stock to hit the price MS was offering in a reasonable amount of time?
Not many will have the same opinion on this, what a reasonable tyme period for one person is too short for someone else and too long for a third person. Even traders are like this, besides the day trader people know about there's also swing traders and trend followers. Whereas a day trader sells stocks they bought during the day at the end of the day, they take an all cash position at the end of the day, trend followers take a long view and swing traders take the middle ground and look at both the short and long term.
FalconShould there be a Law?
Calling someone a "hater" only means you can not rationally rebut their argument.
Delusional much? Google doesn't actually develop services any more - damn near every new service has been the result of an acquisition!
For a site about things like basic rights, Slashdot users sure do like to censor "dissent".
5 dead cat bounces of 10% in a year give you at least a 45% annual rate of return, even after (ridiculously low) US capital gains taxes.
No matter how you slice it, that's good.
The trick is consistently finding the dead cat bounces instead of grabbing something just part way into its slide to oblivion. It's my understanding that the vast majority of day-traders who try to time the market in things like this end up losing money. I wish the author of the parent post good luck, it's not a game I want to play.
Both companies have lots of angry shareholders according to the news.
Freedom isn't free; its price is the well-being of others.
The day after MS says "nevermind" Yang says hey hey sliding stock, we're still open to MS offers.. (pls stop skidding stock) then old man Gates himself comes up the day after with.. umm Jerry.. no. We're done with you. Screw your weak attempts to stop the slide. (inner voice says "and when it hits $20 a share we'll be back") Shoulda took the money and run Yahoo..
Please get basic thinking skills.
Warren Buffet invests in companies that pay a nice dividend or that he believes will grow their stock price. How is that any different than what I said? That's right, it isn't.
An investor -- like the person you vehemently disagreed with at the start of this thread -- is concerned with "what the company does in the longer run." Your counterargument essentially endorsed stock price speculation, rather than doing your own evaluation based on a company's fundamentals.
However, once that had been pointed out to you, you turn around and claim that you were actually saying something else that agreed with the point you'd shouted down: Warren Buffet invests in companies that pay a nice dividend or that he believes will grow their stock price. How is that any different than what I said? That's right, it isn't. Warren Buffett invests in companies whose stock may be purchased for less than (his estimation of) their real value -- "undervalued" stocks. He establishes valuation primarily in terms of present assets, present income and income potential (especially ability to raise prices above competitors because of unique branding/product characteristics, like Coca-Cola or See's Candies -- a commodity business is a chump's game), and quality of management. He's not especially focused on "nice dividends;" he believes that companies should be a sufficiently high-quality investment that they're willing to invest their surpluses in themselves, through stock buyback or debt reduction. He thinks, if the company believes some other company is a better investment than itself, then he should take it at its word, and find that better investment. (You'll notice that many of the companies for which Buffett is a large shareholder have placed him on their boards, and that in those positions he's frequently encouraged debt reduction and outstanding-shares-buyback programs).
Of course, he also believes in buying something only if it's sold at or below the correct valuation, so he'll be happy to take a dividend if the stock price is overvalued or there aren't good opportunities to grow the business. (Which in turn means, if Buffett is willing to sell you a stock, you're probably paying more than it's worth). Berkshire Hathaway itself has paid dividends maybe once in its existence, the one time Buffett couldn't find something worthwhile to invest in.
Buffett does not invest in stocks that "will grow their stock price" -- that's thinking like a high-trade-volume speculator. He invests in companies that he epxects will grow their profitability, with a rising stock price as a happy result. It's a seemingly trivial distinction that points to a significant difference in focus: he's not chasing numbers and shuffling paper like a hedge fund, he's buying part of a business, which he intends to hold long-term, because it's a successful, profitable business, available at a favorable price. In short it's what you originally disagreed with.
So, basically, you're trying to transition your previous statements into agreeing with what Buffett thinks, but you still haven't moved over all the way, because it isn't actually what you originally meant. Keep redefining your position and I'm sure you'll agree with him eventually, but the context makes it pretty clear that that is not what you were originally saying.
Freedom isn't free; its price is the well-being of others.
That's so wrong its scary. Find me a person that is willing to buy or sell a stock (or anything) at a price different than the market price and you have created a money pump.
An investor -- like the person you vehemently disagreed with at the start of this thread -- is concerned with "what the company does in the longer run." Your counterargument essentially endorsed stock price speculation, rather than doing your own evaluation based on a company's fundamentals.How about you give the full quote, where the guy said that the value of a company to an investor isn't the value of the share but what a company does in the long run. As an investor I could care less if the company invests in solar energy or decides to go into the edible underwear business. The return on my investment (dividend + stock price) is ALL I CARE ABOUT. You apparently measure return on investment in another way.
Then you go into a long story about how completely inferior dividends are. Listening to you talk, you'd think a person was about to declare bankruptcy if he is getting a 20% return on investment and it's coming from a dividend. But let's ignore that and take a look at your blatant lack of reading comprehension. When did I say that a company's stock price going up is inferior to a dividend? I said "nice stock price and/or dividend". What's funny is you keep saying that I keep trying to change what I said.
Buffett does not invest in stocks that "will grow their stock price" -- that's thinking like a high-trade-volume speculator. He invests in companies that he epxects will grow their profitability, with a rising stock price as a happy result.Are you being serious with this, or do you not understand basic logic? Let's check what you just wrote (I'll add some variables to make things easier.)
A = Buffet owns stocks that have grown their stock price.
B = Buffet owns companies that have increased profitability.
NOT A (your first sentence)
B and (B => A) Lets simpligy and see what we get
B and (B => A) and NOT A
B AND A AND NOT A = FALSE
But if you had used some common sense you wouldn't have such warped logic. How does Buffet make money investing? Answer: the stocks he buys go up in price. How does that differ from my opinion?
If you don't do your own research, sure, you could trust the share price for your valuation, but that's likely to be incorrect in any timeframe longer than a couple weeks. That's the thinking of a speculator, not an investor.
That's so wrong its scary. Find me a person that is willing to buy or sell a stock (or anything) at a price different than the market price and you have created a money pump.
His name is Steve Ballmer, and he's looking to pay a premium on some Yahoo shares.
I'm saying that the market price may not actually reflect something's real worth. Things can be over- or under-valued, yes? And we wouldn't want to sell them if we think they're undervalued, yes? Not even for a higher-but-still-undervalued price?
How about you give the full quote, where the guy said that the value of a company to an investor isn't the value of the share but what a company does in the long run. As an investor I could care less if the company invests in solar energy or decides to go into the edible underwear business. The return on my investment (dividend + stock price) is ALL I CARE ABOUT. You apparently measure return on investment in another way.
Umm... I didn't repeat the full quote, because I'd given it earlier.
Anyway, the problem here is that you're a speculator who thinks he's an investor, so you don't get the distinction.
The value of the company to an investor is very much what it does. Thinking of the kind you describe here is exactly what gave us the tech bubble of the 90s -- "Who cares what they do, the stock prices are moving in a direction I like!" That's not investment, it's speculation, and it applies equally to commodities (like, say, real estate, or tulips) and to stocks. An actual investor will look at a company's fundamentals, including the quality and effectiveness of its management (like Buffett does), to see what's an undervalued gem and what's overvalued hype. That point is something Buffett stresses: what a company does has a direct bearing on what it is worth, because if it sells generic athletic shoes, well, somebody else can beat it at that game; but if it sells NIKE XTREEM SNEEKERS that kids kill each other over, it can command a price premium (because of the value of its brand) and can thus be expected to yield better-than-average profits over the long term (it has pricing discretion and can set its own profit margins, because it's not selling a commodity).
ROI is important, but it's something that happens in the future. As a speculator, you make bets about the future; as an investor, you make educated bets of a kind that acknowledge that companies, etc. are not interchangeable, even though they can be bought and sold with the same dollars.
You apparently measure return on investment in another way.
No. I (and Warren Buffett) measure the quality of an investment in a different way than short-term RoI based on fluctuations in the security price. The quality of an investment has to take into account whether returns can be sustained, or if they're the result of herd behavior.
Listening to you talk, you'd think a person was about to declare bankruptcy if he is getting a 20% return on investment and it's coming from a dividend.
I don't know where you got that impression. I was just saying that Buffett isn't big on dividends, a fact of which you had seemed innocent in your earlier statement. When did I say dividends were bad? What Buffett has said is that dividends are justified if there's no better use for the money, but that a strong company would want to invest in itself, and if a company can get more value for its money by investing in something other than its own business, why not cut out the middleman?
Let's check what you just wrote (I'll add some variables to make things easier.)
Ahh, yes, the time-honored first-order-logic practice of pretending that language has no nuance or subtlety. I
Freedom isn't free; its price is the well-being of others.
Ok, Ill make one last attempt at you, but I doubt it will work.
I'm saying that the market price may not actually reflect something's real worth. Things can be over- or under-valued, yes? And we wouldn't want to sell them if we think they're undervalued, yes? Not even for a higher-but-still-undervalued price?By undervalued or overvalued you are talking about what you think the price will be in the future relative to the price today. The price of oil is around $120/barrel. It is neither overpriced nor under-priced.
Anyway, the problem here is that you're a speculator who thinks he's an investor, so you don't get the distinction.Which would you rather invest in?
Investment A: will give you 10% interest after 24 hours.
Investment B:will give you 10% interest 10 years from now.
I don't know about you but I'll take investment A. MS is offering an immediate and guaranteed double digit return to Yahoo shareholders. What is Yahoo offering: "well maybe at some time in the future, we dont know when, we think the price will possibly be worth more than what Microsoft is guaranteeing." Yeah, I'm a real "speculator" for wanting the guaranteed and immediate double digit return on investment. But you are a smart "investor" who is gambling that at some point in the future a company that continuously finds new ways to lose market share will eventually give a great return.
It's also humorous that you think that investing in the stock market isn't speculative. Newsflash, but just because the US stock market has averaged 10% over its lifetime is no guarantee that you'll make a profit in stocks. Even Buffet is speculating. He's a big Coca-Cola investor. Who knows? Maybe some day in the future Coke could get involved in some scandal and the stock folds (unlikely but its still possible.)
And, incidentally, if you think that that's true, then you'd be leery of the deal too, since half its value comes in the form of an interest in a company which is overpaying for YahooGod you are dense. They are offering investors a PREMIUM over the price of the shares in order to make the deal more likely. Picture a person in a rush to move out of the state (maybe he got a good job offer somewehre out of state)..he might very well sell his house under the market value in order to convert the transaction more quickly. In other words he's willing to take X dollars for his house today than wait 2 months for 1.25X dollars. Microsoft is willing to pay a premium to investors to complete the deal quickly so that they can quickly use Yahoo to compete against Google.
Investment A: will give you 10% interest after 24 hours.
Investment B:will give you 10% interest 10 years from now.
I don't know about you but I'll take investment A. Obviously. But you're arguing a straw man here; I certainly never proposed this comparison. MS is offering an immediate and guaranteed double digit return to Yahoo shareholders. What is Yahoo offering: "well maybe at some time in the future, we dont know when, we think the price will possibly be worth more than what Microsoft is guaranteeing." Yeah, I'm a real "speculator" for wanting the guaranteed and immediate double digit return on investment. But you are a smart "investor" who is gambling that at some point in the future a company that continuously finds new ways to lose market share will eventually give a great return. As I said in the last post, I make no claims about the quality of this particular deal. I haven't researched Yahoo! and don't have any valuation in mind for them. I'm just saying that your original response was blind to how fundamentals-based value investing works. It remains so, although if you'd originally intended to argue that MS's deal was generous to Yahoo! shareholders based on the fundamentals, you might well be right about that. That doesn't preclude the original post's comment that the board might disagree, without having abrogated their responsibility. (After all, they stand to gain a whole lot of money for selling all their stock for less than it's really worth.)
I've no idea if this is a good deal or not, and never claimed to. I just grant that the Board is obliged to take the long view -- that "Shareholder value is not equal to stock value, its about what the company does in the longer run" -- and that it's legitimate (though potentially incorrect) for the board to think that continuing the company will be more profitable for all investors long-term than cashing out right now would be.
I'd also point out that in describing the management of the company as incompetent, you're thinking like an investor, who looks at the content of what he's buying. You're coming around to the argument that Yahoo shareholders should take Microsoft's offer because it's above the correct valuation of the stock. I have no opinion about that, but it seems a plausible argument to me (as opposed to what you originally said, which was that Yahoo shareholders should take Microsoft's offer because it's above the current market price). It's also humorous that you think that investing in the stock market isn't speculative. I agree with you that stocks are risky. I'm using "speculative" in a narrower sense here -- that of buying an investment based on technical features while treating its content as a black box, without thorough research into the underlying fundamentals, that "I don't care what the company does" attitude you expressed a couple posts ago. It's a speculator who buys tulips because he sees everybody else doing it and expects past price trends to continue just because that's the trend. They are offering investors a PREMIUM over the price of the shares in order to make the deal more likely. Yes, that's fair. There may be a sound strategic reason for them to be paying a premium; they may be motivated buyers, not bad valuators. Consider that argument withdrawn.
Freedom isn't free; its price is the well-being of others.
I do not (and never have believed) that Jerry Yang and the rest of the Yahoo board was ever were serious about selling the company.
First there were no negotiations, Microsoft simply extended an offer which the Yahoo! board turned down.
Lol, you. I'm not getting into this again. Microsoft offered $31, Yahoo wanted at least $37. see article ("The collapse of talks between Microsoft Chief Executive Steve Ballmer and Yahoo CEO Jerry Yang prompted Wall Street brokerages to cut their ratings and price targets on Yahoo, which held out for a $37 per share value despite a sweetened off from Microsoft for $33 per share."). Microsoft raise its offer to $33, Yahoo said no. Offer; counter offer; counter-counter offer. A reasonable person would see this as an attempt to bargain between two parties, and so will any court in the U.S. End of discussion.For example, look at the actions the board and management took right after the offer was announced.
The board didn't want to be eaten so they took steps they thought would slow down an acquirer.
They didn't do just that, they took actions that potentially could destroy the company's value, breaching their duty to the shareholders. Regardless of any circumstances a company's management is not allowed to take deliberate actions that can reasonably result in the destruction of a the company's wealth or value without the explicit permission of its shareholders. The legal term for this is waste, and it is very much illegal under any state's corporate law. Examples of wasting actions include...They enacted huge employee termination compensation plans, including golden parachutes for management.
That's standard practice in business, and has been for a long tyme [sic] businesswise [sic] .
Yes, but it is not "standard business practice" to enact them in an attempt to thwart a takeover. This is a perfect example of a wasting transaction. It was down without the explicit permission of the shareholders (who usually have to approve or give permission to the board to negotiate management contracts), and done in a fashion that destroy's the company's value by making it less valuable. Huge contingent payments to management not only diminish the company's value to a potential acquirers, but in instances where the realization of the contingency is reasonably likely also require the the company to make impairment deductions against its earnings (i.e., lowering their recognized profits in anticipation of the payments). See FASB Statement No. 5.They tried to make a deal to acquire a portion of AOL
Citation please.
My pleasure. ("And then there was that AOL deal with word of some share buybacks at above-market prices.. . . And though Yahoo-AOL talks continue, according to the report, there's not much urgency (that's fair enough, no need to rush at this point.)") (emphasis added).Like I said before, Yahoo's board was not reviewing this potential merger in good faith. They clearly violated their fiduciary duty to shareholders, and will be ousted, probably by Carl Icahn.
The sun beams down on a brand new day, No more welfare tax to pay, Unsightly slums gone up in flashing light...
Lol, you. I'm not getting into this again. Microsoft offered $31, Yahoo wanted at least $37. see article
TFA does not say when any negotiations happened. And though TFA is on Yahoo!'s website it's a news article from Reuters. And no, I don't consider a single counter offer as negotiations just as I wouldn't if someone offered me $50 and I impulsively said $100.
They didn't do just that, they took actions that potentially could destroy the company's value, breaching their duty to the shareholders.
As a shareholder, if Yahoo! hadn't taken any steps to drive up the bid price I would have considered it a breach of fiducial duty, as in typical negotiations the buyer first offers a low price.
They enacted huge employee termination compensation plans, including golden parachutes for management.
That's standard practice in business, and has been for a long tyme [sic] businesswise [sic].
Yes, but it is not "standard business practice" to enact them in an attempt to thwart a takeover.
First, Googling "businesswise" returns about 265,000 results. Next, "Golden Parachutes":
"Golden parachutes are compensation agreements that provide for severance payments to top executives who are terminated or demoted pursuant to a takeover or other change in control. Companies argue that such provisions are necessary to keep executives from "jumping ship" during potential takeover attempts. While Calvert recognizes the merits of this argument, golden parachutes often impede takeover attempts that we believe shareowners have the right and the responsibility to consider."
They tried to make a deal to acquire a portion of AOL
Citation please.
My pleasure.
Thanks for the link, however it does not say there were talks of acquiring AOL or parts of it. What it does say is "And then there was that AOL (NYSE: TWX) deal with word of some share buybacks at above-market prices". Buybacks aren't buyouts or acquiring others.
And though Yahoo-AOL talks continue, according to the report
Talks on what, a share buyback?
Like I said before, Yahoo's board was not reviewing this potential merger in good faith. They clearly violated their fiduciary duty to shareholders, and will be ousted, probably by Carl Icahn
And as I said a number of tymes, if I were a Yahoo! stockholder and the board had accepted MS's first offer I, and others, very well have filed a lawsuit for not fulfilling fiduciary duty. And Carl Icahn? In the first sentence of TFA it says he is reportedly buying Yahoo! shares now and not when the offer was made. If he did not own any stocks in Yahoo! he has no standing to file any lawsuit, though now that he may own some he does have standing to nominate new board members. You think Balmer is a hardball negotiator? I hazard to say Icahn is harder. And if Balmer still wants to acquire Yahoo! Icahn may demand even more than the last offer.
FalconShould there be a Law?