Shareholders may bring Microsoft and Yahoo together

by billso on Sunday, 17 February 2008

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:

Share

Tagged as: AOL, ceo, cxo, Google, Microsoft, Yahoo

  • http://billso.com billso

    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.

  • http://www.atypicalliving.com atyp­i­cal­liv­ing

    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.

  • http://billso.com billso

    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.

  • http://billso.com billso

    By the way, SaaS is “soft­ware as a ser­vice”. Web­mail, online word proces­sors, ERP packages…

  • http://billso.com billso

    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.

  • http://billso.com billso

    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.

Previous post:

Next post: