MS Buying Yahoo? Bad Idea, Even At a Discount

jfruhlinger writes "Nearly four years ago, Microsoft tried to buy Yahoo, but eventually withdrew the offer in the face of resistance from Yahoo's leadership. This week rumors resurfaced that Microsoft was once again bidding on the struggling Internet pioneer, this time for significantly less money. But even at a discount, it might be a pretty bad idea for Microsoft to get involved in the unfocused, money-losing Yahoo."

Comments

ballmer

[KingAlanI]

"scratch that. going to fucking kill ourselves, not google."

Leave it for Alibaba

[mark_elf]

Jack Ma wants to regain control of Alibaba http://money.cnn.com/2011/10/01/technology/alibaba_yahoo/index.htm/, makes more sense for them than for Microsoft. I wonder if the MS interest is just to drive the price up for some reason.

Who, exactly, is losing money?

[JakiChan]

Say what you want about Yahoo! but it is not "money-losing". Yahoo! is profitable. Yes, top-line growth has been a problem but management of the bottom line has driven profits UP not DOWN. Bing may be losing money hand over fist but Yahoo! is still bringing in the cash.

I bet the folks who love to keep beating on Yahoo! also kick puppies for fun...

Re:Who, exactly, is losing money?

[JakiChan]

Uhm, no. The submitted said in his submission that Yahoo! is losing money. It is not. As much fun as it may be to kick Y! I think one should at least use the facts. MICROSOFT is losing money fast, but Y! is profitable.

Re:Who, exactly, is losing money?

[airfoobar]

I haven't exactly been caring about what they've been up to, but afaik they been selling all sorts of assets and firing swathes of employees to stay profitable... and their brilliant CEO was taking $50 million salary a year... while completely eviscerating whatever was left of the company.

Re:Who, exactly, is losing money?

[Anonymous Coward]

MICROSOFT is losing money fast

You mean the company that made $23 billion last year? Nearly as much in profit as Google's revenue and 3x their profits. 65% more profits than Apple. That company? That company is losing money fast? Really?

Really?

No seriously.. really?

Re:Who, exactly, is losing money?

[LordLucless]

firing swathes of employees

Yes, that is what's known to people like the OP as "managing the bottom line"

Re:Who, exactly, is losing money?

[Hadlock]

They're a revenue stream for some hedge fund or conglomerate, sure. You can bank on them having level revenue for the next 2-5 years, but there's no growth left there. R&D got the axe years ago, and they haven't developed a noteworthy product or championed a cause that anyone can remember since free email (yahoo mail) and yahoo maps... which are third rate backwaters these days. All that is left is a bunch of degree mill MBAs looking to pump up the company to sell it to investors... same as AOL. The trade name doesn't hold the glamour or instill the brand pride it did in the first half of the 00's.
 
Sure, profits are UP, but at what cost? Employee morale must be at an all time low, they are hemorrhaging long time employees, the board of directors is directionless and they have had no CEO with a sense of direction since they kicked out Jerry Yang. The soul of the company is dead and the product they sell is a commodity; no one has faith that you could reasonably improve the shareholder value by 20% in five years.
 
They could bring back Jerry Yang, but that would involve scrubbing the entire board of directors to get him back; not likely. Yahoo is circling the drain, investors are looking for a way to cash out without alarming anyone, but nobody is buying, which only drives their stock price lower. So long, Yahoo, and thanks for all the free email!

Re:Who, exactly, is losing money?

[Dunbal]

I bet the folks who love to keep beating on Yahoo! also kick puppies for fun...

Hey!

Re:Who, exactly, is losing money?

[bmuon]

Remember that most users are not technologically literate.

That used to be true. People are getting more and more tech savvy and everyone in the tech industry is aware of it.

Re:Who, exactly, is losing money?

[thegarbz]

There is also no reason to believe that they will not continue on the same path they have been for the past decade.

What's that path? The path that saw them steadily rising since the dot com pop? Suffer through the economic crunch and then hold steady even today as the world's stock markets are plunging? Or the company which has posted an UPWARDS trend in net profits since 2009 and have had a positive trend since 2002?

Seriously let me guess, you're a global warming denier too cherry picking only the stats that suit you to make your argument.

Now let's look back at the figures:
Starting where you left off:

294 -- 213 -- 310 -- 152 -- 142 -- 141 -- 117 -303 (yes negative $303M in 2009). From 2002-2004 they were reporting lower income than now. From mid 2006-2008 they were reporting lower net income than now. Basically look at the data points on a graph and you end up with progressive increase with a few spikes since the dot com bubble collapsed.

Extrapolating is fun isn't it.

I seriously doubt it.

[blackicye]

It was a bad idea then, it's no better of an idea now (and some would argue worse.)

Why not wait another year or two and buy Yahoo for an even bigger discount, something closer to free.

Re:"MS Buying Yahoo!" rumor time: Here we go again

[blackicye]

Lots of pontificating about how terrible the very idea is from fat and clueless basement dwellers.

Must be that time of year once more.

How are your Yahoo shares doing? regretting your board's incredibly stupid decision to not sell when they could huh?

Are we talking about the same Microsoft?

[Required Snark]

"a pretty bad idea for Microsoft to get involved in the unfocused, money-losing Yahoo."

Am I wrong, or is the phrase "unfocused, money-losing" pretty much the definition of the stuff that Microsoft is rolling out these days? SilverLight, Bing, Zune, .NET languages, ...

Re:Are we talking about the same Microsoft?

[Alex Belits]

I typically make applications/daemons on a POSIX platform, but I always prototype in .net

No, you don't.

Re:Are we talking about the same Microsoft?

[Locutus]

that "focus" on languages has always been more about locking developers( and therefore software ) to their Windows platform. Silverlight is about limiting or stopping Adobe Flash because not only did Adobe become cross platform but Flash is a development platform which works across all platforms. This kind of thing is a threat to Microsoft's revenue stream( Windows ). So that's why Silverlight was created. As for MS .NET, that was in response to Java which is cross platform and the same rules apply regarding protection of the revenue stream. The kind of protectionism I talk about is evident in most all of the exposed emails from court cases which made public internal Microsoft email and depositions.

Because Microsoft's entire revenue base is tied to the Windows OS and it is a substantial revenue stream, protecting it at all costs( in the billions annually ) is business as usual and has worked for them for 20 something years. The funny thing is, they never had to compete in the portable space( disconnected mains power ) much and it never was much of a threat to the desktop or server. Apple changed that with the iPod/iTunes and how it showed great usability outside of the Microsoft ecosystem. It also expanded the Apple brand and sold desktops. Along came the iPhone and the Vista crapware and people really started taking non-Microsoft platforms seriously. GNU/Linux on the server side was doing quite well too. Zune was an attempt to curb the iPod craze but nobody fell for it since the Apple brand meant more than the Microsoft brand and you were not cool if you were Zuned. BING is Microsoft's attempt to limit Google's growth and brand and it too is failing and costing Microsoft billions. long story.

LoB

Yahoo is just a website

[satuon]

I think of google as a search engine that happens to have a web page which you can use if you don't have a search bar in your browser. But when I go to yahoo's page, it looks more like a news site than a search portal. To me it looks like an ordinary website, not much different from cnn.com.

Re:Yahoo is just a website

[msobkow]

Very true. I have an email account at Yahoo (had it for years), but other than that I've never knowingly used any of their services since Google beat them at the search game. They're a good news aggregator, but if they disappeared there would still be hundreds of sites filling that niche. In fact, the only reason I end up reading their news is that I get taken to the page when I log out of my email account.

But I wouldn't say they're "unfocused" as the summary says, and it's been made clear that the summary is completely wrong about them losing money. Like most web-based companies, they're constantly on the lookout for "the next big thing." Their big problem is they've never really found "the next big thing", though they've developed and deployed a lot of "me too" services.

Despite that, they're a far more recognizable brand than "Bing", and unlike Bing, their search results seem to be on-topic (just checked a couple queries.) Apparently Yahoo still has a few tricks in their search engine that they could teach Microsoft.

Money-losing!?!

[Dahamma]

I know Yahoo isn't particularly trendy right now, but their 2010 EPS was 0.88 and they have made a profit so far every quarter on 2011.

Calling them "money-losing" in a slashdot post isn't only completely incorrect and horrible journalism (thanks, Timothy), but lesser publications and individuals have been sued for libel for this sort of thing when it affects the stock price...

Re:Money-losing!?!

[Anonymous Coward]

AOL used to make loads of money too.
There's a bunch of things that's pretty obvious.
1. They don't own the coretech of what drives their business.
2. Customer loyalty and satisfaction arent what it used to be. No new features or comparitives. Exactly why use google?
3. No real presence in the app space. their apps are the worst in iOS.
4. No real presence in social. twitter, faceboock, google+
5. CEO musical chairs.
6. Large pockets of yahoo talent disappearing.

Let's say they have make black. I think their trending down. I don't think they have what it takes to pull to black when they do hit red either. They are just too far behind.

Re:Money-losing!?!

[Dahamma]

I'm not saying, it's right, but I guarantee you posters on financial sites have been sued many times in the past - ironically several times on Yahoo Finance boards...

Re:Money-losing!?!

[Dahamma]

Actually, I agree with everything you said (other than the horrible grammar) - but it doesn't really have anything to do with my post :) Regardless of all the ways they can and should fail, they are making a profit, and stating otherwise is incorrect.

Re:Money-losing!?!

[bloodhawk]

but lesser publications and individuals have been sued for libel for this sort of thing when it affects the stock price...

umm lesser publications? what could possibly pass as a lesser publication when it comes to financial information than /.? seriously if anything EVER said on here was used for stock decisions then the moron making said decisions was going to lose his money from the next guy that tried to sell him a bridge anyway.

Re:Money-losing!?!

[Hadlock]

Reading that, I don't think you understand the market Yahoo is in, or whoever told you about them was lying to you. Or you have significant interests in Yahoo's stock price.
 
Looking at their quarterly statistics without looking at their product and the market as a whole is pretty short sighted. I don't think they've been "trendy" for quite a while, and I think this reflects on the fact that they haven't innovated in a market that for the last 10 years has been expected to drive bleeding edge web technologies. Google keeps pressing on with innovations in social networking despite failing spectacularly at it by my count at least twice, Wave and Buzz; Google+ seems to be sticking in comparison. Microsoft is presenting at TED talks. Where is Yahoo in all this? You get email, news, and games. I can't remember the last time someone showed me printed directions from yahoo maps. Is there even a yahoo maps app for the android and iphone? This is what I'm getting at. Yahoo is firmly grounded in 2003. They're almost a decade behind Google and Microsoft, and they dismantled their R&D departments. This is not something healthy tech companies do. Apple has retail stores. Sony keeps reinventing theirs. Google announced a retail store in Europe. Microsoft has been selling computer accessories since I was a child. Yahoo is a name. They sell advertising, but have contracted out the search and advertising(!) to Microsoft. They will have a steady revenue stream for the foreseeable future, but without an R&D department (where their profits came from!) and a budget to fund it, their baby-boomer user base is going to lose interest eventually, and I don't think the younger generation (6-21) values their name brand any more than ask jeeves or alta vista at this point.
 
This isn't a retail sector where you can slash prices, hire a new spokesmodel, introduce a redesigned product lineup and buy some ad time on national TV and see sales spike through the roof for your mall retail stores. For a car analogy, Google and Microsoft are building (at a profit) mass-production hybrid hatchback vehicles that get 55mpg and have prototype fully electric plugin cars on the road. By comparison, Yahoo no longer makes cars and still only builds trucks and SUBS that only run on leaded gas, need their carburetors adjusted regularly and don't have emissions controls; the only way their cars are still sold are through government lobbying to ease emissions controls and an act of congress to give their customers tax breaks.

Re:Why?

[teg]

But they already have their own search engine Bing, or is that worse than Yahoo? Why would they be interested in Yahoo @ all? The only company that could make a good case for buying them is Apple, so that they can use something other than Google for their native search services on the iPad and others.

Yahoo! has stopped doing search themselves, search has been handled by Microsoft for a couple of years now. So there is no value there... the value would be in yahoo.com, Flickr and various other web services.

Better idea

[Anonymous Coward]

Earth to Microsoft: Yahoo! is not worth $44 billion.
You could buy General Motors lock, stock, and barrel for $14 billion, name all the cars "Google Sucks,"
and get more bang for the buck. Heck, you'd have enough left over to buy Ford for around $16 billion,
and you could name all those cars "Google Sucks More" and still have $14 billion left over for a big party

-stolen from a post here a long while ago the first time this came around. still true-

I completely understand Microsoft.

[stefaanh]

Lately there has been a rumour that the Chinese were after Yahoo!

My guess is, "Yahoo!" is something is see Ballmer yell on stage, jumping around. "Bing!" is sounding like chinese to announce on stage.
They are just trading the names.

Just wait and Google.

Re:Why?

[Hadlock]

To further your point, within a week of installing the new CEO at Yahoo, they signed on Microsoft to do both their search and advertising for them. This is snarky to say, but it's true - Microsoft already owns them. Yahoo is a revenue stream for Microsoft, without any of the risk involved for Microsoft's share price or litigious liability. Next to installing their own executive at Nokia last year, this was the ultimate un-acquisition. All of the benefits with no downsides and zero long term liability.

Search Engine???

[Cruciform]

You guys keep talking like MS is buying them for tech.
Yahoo is like Google and Facebook. Their product is the user. The loyal, 15 year, highly profiled, user.

Data centers and the like are mostly just a nice bonus on top.