Journalists are starting to discuss what financial analysts realized earlier this month: 90 percent institutional owners of Yahoo stock are also Microsoft shareholders. See this CNET article for details.
Fund managers don’t like to bid against themselves
This places companies like T. Rowe Price and the Capital Group in an awkward position. Yahoo CEO Jerry Yang has vowed to fight the Microsoft offer, even though a Microsoft takeover makes some sense for both companies. If Yahoo is seriously negotiating with News Corporation and AOL, as this report indicates, Yahoo CXOs must be quite desperate to avoid assimilation into the redmond hive mind.
An institution that holds YHOO and MSFT must balance its risk
Institutional fund managers may want an offer of US$40 per share for their Yahoo stock, but what happens if Microsoft’s stock price stumbles? These fund managers might consider a US$35 offer if it means a quick resolution to this battle. A proxy fight might take months to settle, and would send Yahoo into a tailspin as employees defect and CXOs waste time defending their firm.
On Thursday, the New York Times commented on this blog article by Bradley Horowitz, who announced on his blog that he was leaving Yahoo. Horowitz had been the VP of Yahoo’s Advanced Development Division, and his farewell message includes a few “ADD” puns. He wasn’t laid off – he simply left Yahoo to take a new position at Google.
The endgame plays out
The remaining Yahoo CXOs may not be ready to admit defeat, but it is clear that Yahoo management has less control over the company’s fate with each passing day.
See my earlier posts on the Microsoft-Yahoo debacle:
- 7 February 2008: Microsoft’s rocket ship
- 4 February 2008: Microsoft acquisition of Yahoo faces roadblocks
- 1 February 2008: Microsoft makes offer for Yahoo
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From Business Week comes this article, which adds more weight to my final prediction. Microsoft might find a hostile takeover fight is cheaper than a higher bid for Yahoo.
Also, word is that in the News Corp. deal that Yahoo will be folded into the MySpace franchise.
If there’s anything that I need to avoid, it’s the prospect of “mY!space.”
The logical collaboration would be AOL/Yahoo, because the combined web presence of both could rival the ubiquitous G. I do have to say though, unless they come up with a SaaS web program as savvy as the gMail/google docs/gCal EVERYONE is dead in the water.
Yahoo gets folded into MySpace? That makes even less sense than anything I’ve read about the Microsoft-Yahoo debacle.
Still, it could happen. MySpace hasn’t been the advertising giant that News Corp envisioned. If Yahoo knows anything, it’s advertising.
Here’s an article from today’s Guardian. Rupert Murdoch has little to lose by courting Yahoo.
Last June, there were reports that News Corp wanted to give MySpace to Yahoo, in return for a 30% stake in Yahoo.
By the way, SaaS is “software as a service”. Webmail, online word processors, ERP packages…
From The Register, here’s an article about SaaS marketing. Sure, it’s a web-based application, but that doesn’t mean its good, cheap or reliable.
John Markoff is spot on with his comments in yesterday’s New York Times. Integrating Yahoo into Microsoft’s operations is a difficult challenge.
Markoff cites one of my favorite examples: Microsoft’s 1997 purchase of Hotmail. It took 3.5 years to convert Hotmail servers from UNIX to Windows!
Microsoft has little choice but to “eat its own dog food”. Industry insiders expect Microsoft to use its own web sites to demonstrate the scalability, reliability and features of Windows server software.
Yahoo uses FreeBSD, a version of UNIX, as its primary server OS, along with Java and PHP as programming languages.
It would take an enormous effort by Microsoft to port Yahoo to a Windows infrastructure. I agree with Markoff: Yahoo’s developers and programmers might cooperate if Jerry Yang blessed Microsoft’s takeover.
If it’s a hostile takeover, forget it. Yahoo will bleed OSS and UNIX talent. Those employees will leave Yahoo before they cooperate with the “enemy”: Microsoft.
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