billso.com

Motorola announced last month that it wants to sell its mobile phone unit, which is ranked third in global market share, according to Engadget.

No one’s buying. This month, several companies including Samsung and Dell have announced that they are not interested in laying out US$9 to 12 billion for the business.

It’s a bit of a shock. The Motorola brand name is well known, and the company has remained competitive. Certainly some up-and-coming manufacturer would want that nameplate! It’s the kind of play that made sense a few years ago, when Chinese manufacturer Lenovo purchased IBM’s personal computer business, including the ThinkPad name.

Motorola executives backpedaled last week at the Mobile World Congress, announcing that the company remains committed to the mobile handset industry.

Last Monday, Microsoft purchased Danger, the developer of T-Mobile’s Sidekick line. Om Malik estimated that Microsoft paid US$500 million for a mobile handset line that has a decent market share among the under-30 crowd.

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

Cisco Systems, the world’s largest network equipment company, has released its largest switch ever. The Nexus 7000 can move 15 terabytes of data per second, and is designed to connect distant data centers together. According to Forbes, that is fast enough to move the entire Wikipedia in about 40 seconds. The 1-meter tall box will require special cabling and cost US$200,000 a year to maintain and operate.

As companies move their servers and data storage into larger data centers, these types of switches are necessary. The continued growth of web-based applications is also supporting this trend. Networks are a lot like plumbing, but there’s only a finite amount of water on the planet. The amount of data produced and stored continues to grow.

According to a Reuters article, John Chambers, the long-time CEO of Cisco, believes network growth will continues at a fast pace for the next ten years as ISPs and data centers add capacity.

Hawaiian Telcom CEO Mike Ruley was dismissed yesterday. His replacement is Stephen Cooper, co-founder or Kroll Zolfo Cooper, a New York City-based interim management firm. Cooper is best known as the Enron’s CEO during the company’s bankruptcy. Today’s Star-Bulletin article has a brief biography of Cooper. Kevin Nystrom, a senior director at KZC, will join HawTel as COO.

While Cooper stated in today’s Honolulu Advertiser that HawTel is not a “distressed company”, it’s now clear that the Carlyle Group is unhappy with their acquisition’s performance. HawTel has lost thousands of subscribers to mobile carriers and Time Warner Oceanic’s VoIP services, leading to US$137 million in financial losses since 2006. I mentioned some of the operational issues on my old blog on 16 November 2006, and last week BusinessWeek discussed how market forces have affected the US telecom industry overall.

The Advertiser noted that Ruley put his Kahala home on the market in early January, which is a possible indication that changes were coming at HawTel. The company has eliminated over 100 management positions since October 2007.

As I told my IS 7010 class last night, Microsoft wants to buy Yahoo. Microsoft made the announcement this morning (AP, New York Times, ValleyWag, BoingBoing). The offer is almost US$45 billion in cash, or $31 per share.

Note: I didn’t discuss this story with anyone I know at Microsoft (MSFT) or Yahoo (YHOO) , and I don’t own stock in either company.

This deal has been anticipated for almost a year now, ever since former Yahoo CEO Terry Semel spurned another Microsoft offer to purchase Yahoo. Microsoft needs Yahoo’s technology, user base and web properties to battle Google. Here’s a 10 January 2008 blog article that discussed a few aspects of an anticipated merger, and a response that more or less said such a deal was a fantasy.

As the New York Times points out, this offer is well-timed. If Yahoo doesn’t come to terms quickly, Microsoft can pursue a hostile takeover through several means, including a board takeover at Yahoo’s June annual meeting.

Yahoo has lost its yodel

Yahoo co-founder Jerry Yang took over as the company’s CEO last year. He hasn’t helped a great deal, but he may be one of the few Yahoo CXOs to remain after Microsoft cleans house. Co-Founder David Filo will go to work in Microsoft’s data center division. As ValleyWag points out, if Microsoft wanted to keep the remaining CXOs, this would have been a friendly takeover offer.

This BusinessWeek article is mild compared to other criticism of Yahoo that I had read in the Wall Street Journal, SearchEngineLand and Screenwerk.

The company had previously announced that it was laying off 1000 employees. Financial results were below expectations, and the online advertising market is in flux. Yahoo depends on ad revenue to fund its acquisitions, but Microsoft, Google and other companies have been more aggressive.

Yahoo is also losing a significant chunk of its guaranteed revenue from AT&T’s residential DSL business. A new web advertising deal for AT&T’s mobile network may cushion the blow. Yang promised a plan to renew Yahoo within his first 100 days. After 200 days, stakeholders are still waiting.

Microsoft needs Yahoo’s position in web advertising, and could easily absorb Yahoo’s large international user community. After that, it’s a sorting process that’s similar to what HP did with Compaq. There is a great deal of overlap between the Microsft’s and Yahoo’s web services, including search, webmail, IM, online images, social bookmarking, and news. I’m sure Microsoft’s CXOs have an initial plan, but the merger – if it does happen – would take 2 years before the dust settles. SearchEngineLand has posted a long article that discusses what might happen in each business unit.

In a way, I’m almost sad to see Yahoo in play. I still use my first Yahoo ID, which has a space character in it. Yahoo fixed that hole a few months after I set up that account in 1996.

The company was the first major commercial Internet search portal, but it’s best days were in the 20th century. I have often used Yahoo’s main page as an example of cluttered web design and as a symbol of an overly broad corporate strategy. MSN.com’s main page isn’t much better.