Falling Microsoft Income Endangers Yahoo Bid

Dionysius, God of Wine and Leaf, points out a new wrinkle to Microsoft's pursuit of Yahoo. The most recent quarterly results, which saw Microsoft's earnings drop by 6% from the previous year (revenue from Windows alone was down 24%), have caused the stock to dip. This has reduced the value of the cash-and-stock offer from its original $44B to something nearer $40B. Yahoo, of course, has maintained all along that the original offer was lowball. A business professor is quoted: "Whatever leverage [Microsoft] built up in the last few days could be slipping away."

Clearly caused by H-1b limits

[Baldrson (78598)]

It's clear that if Bill Gates could just get the H-1b caps lifted, the best and brightest [cis.org] from around the world could come to the US and be paid $100k straight out of college [programmersguild.org] to save Microsoft.

Anyone who was around during the dot-com era remembers how it was H-1b limits that caused the crash of that wonderful era. Those who do not learn from history are doomed to repeat it.

wrong wrong wrong*

[thermian (1267986)]

It was the absurd level of investment which saw things like startups being valued higher than HP, Xerox, and if I remember rightly, the Ford Motor company, that caused that.

Venture capitalists poured billions into the industry without considering that the market had yet to produce the great new age of commerce that was promised.

Startups without a coherent product were valued as multiple million dollar companies, and attracted investment like dead dogs attract flies.

And all this at a time when I believe broadband wasn't even widely deployed.

It was a bust waiting to happen. It's just a shame that so many viable companies were taken down in the crash.

Re:wrong wrong wrong*

[lightversusdark (922292)]

Whoosh!

And don't try the old asterisk in the subject line trick - we can see you're not a subscriber!

Re:Clearly caused by H-1b limits

[pubjames (468013)]

Yes, but $100k is now worth relatively little in proper money.

I was going to make a joke about this but actually its not funny.

Re:

[CastrTroy (595695)]

$100,000 US is still quite a bit of money. Expecially if you are talking about yearly gross income. I don't think you realize just how little money some people can live off, even in the United States. $100,000 should be more than enough to support a family. If it's not, you aren't spending your money correctly. If you aren't supporting a family, then you should be even better off with all that money.

I really wouldn't worry..

[encoderer (1060616)]

Currencies are SUPPOSED to fluctuate. It's healthy. Like a forest fire. Recessions, too, for that matter.

The weak companies can burn to the ground to un-clutter their marketspace and allow healthy, new companies to grow in their wake.

The strong dollar led to rampant outsourcing in the late 90's/early 00's.

The US was an expensive place to do business.

As the dollar weakens, the US becomes more and more attractive for foreign investment. European companies (like Volkswagen, for example) see a supremely talente

Re:

[pubjames (468013)]

It's not healthy. Healthy is a strong, stable economy with a strong, stable currency. The dollar is dropping like a stone. This has lots of negative consequences, which far out-way the benefits.

The fact that European companies find it cheaper to employ people in the USA than other countries is not a good thing. The ability to outsource to other countries where labour is cheaper is a sign of economic strength, not weakness.

Re:

[encoderer (1060616)]

Economies and currencies are not static. Never have been, never will, and never SHOULD be.

Sure, as a currency reaches the extremes (both high and low) of its value, some people are hurt by that economically speaking.

But that's the point of a personal and social safety net.

I mean, the notion that a currency should be static just makes no sense whatsoever. A currency is essentially a "score" of the performance of a given economy. When an economy is strong, when growth prospects are strong, the currency is str

Re:

[anandsr (148302)]

Actually it will be very easy to reduce the demand of H1-B visas. Just stop them from being slave laborers to the companies importing them. This can be done by just allowing them to switch jobs, and allowing them to apply for Green Cards without sponsorship.

Currently the companies hold the H1-B visa holders by a tight leash because they can't switch jobs once Green card is applied. Also they can't switch jobs in the early years.

If both these restrictions are removed, companies will not be able to afford to

Re:

[jkrise (535370)]

It is absurd to suggest that (a lack of) engineers caused Microsoft's downfall. The more engineers and managers it threw at Vista; the worse the end product. Marketing and (poor) management will be the downfall of Microsoft; not engineers or programmers; H1B or otherwise.

ummmm

[oliverthered (187439)]

When I was a lad companies used to do something called training to get their employees up to scratch, Why can't Microsoft/ Yahoo/ IBM do this?

Re:ummmm

[timmarhy (659436)]

They do, grants and on the job training.

this might shock you so hold on to your strawberry daiquiri, it takes years to get enough experience to even start training at the level MS needs to hire people to stay competitive.

Re:

[rtb61 (674572)]

M$'s failing is not a lack of coders or Ph.Ds it is management incompetence. Very poor business decisions and, a total disconnect from their customers. Hiring more people just means blowing more money on failed products, or just being able to produce even more bad code.

M$ failings have nothing to do with a lack of technical staff but everything to do with the Vista (P)OS, the user interface failing on Office 2007, the Zune edsel music device, pathetic xbox360 failure rates and, the failed re-branding of M

Re:

[Simon Brooke (45012)]

Why do you have to drag this bullshit sarcasm into this discussion? [scythe] So, stop that stupid sarcasm and get some of the facts, OK?

Because, outside the US of A, there are still some people who understand humour. Inside the US of A, of course, you can't even spell it.

Its a beautiful day after all!

[Dana W (1281070)]

Lets all say that together, shall we? "Falling Microsoft Income" Beautiful........... Do I get two more wishes?

Re:

[cheater512 (783349)]

What more could you wish for? :P

The Offer is NOT LOWBALL

[SerpentMage (13390)]

If you think that Yahoo which is trading over 40 to 50 PE as lowball well then YAHOO is crazy.

Look at the earnings growth of Yahoo for the past five years. IT IS pitiful. Yahoo is being too arrogant for its own good.

Personally, I think Microsoft should just walk away. Watch that Yahoo stock drop faster than gravity.

Re:The Offer is NOT LOWBALL

[Solandri (704621)]

If you think that Yahoo which is trading over 40 to 50 PE as lowball well then YAHOO is crazy.

Look at the earnings growth of Yahoo for the past five years. IT IS pitiful. Yahoo is being too arrogant for its own good.

Over 5 years, Yahoo stock has outperformed Microsoft stock [yahoo.com]. If a Yahoo stockholder were basing his decision solely on the 5-year history, he would have to be crazy to want to trade his Yahoo shares for Microsoft shares.

Yahoo has only run into problems during the last 2 years, which is kinda short to declare the company dead. And their current P/E (with a price based on Microsoft's offer) is 35, which seems about average for most tech stocks. The day prior to Microsoft's bid, YHOO had dropped so low I was considering picking some up. I'm still kicking myself for putting off the research for a day so I could watch a movie.

Windows revenue dropped 24% ??!?!!!

[jkrise (535370)]

Colour me surprised, I thought with customers buying Vista AND XP; Windows revenue should've gone up actually. Even in Vista, the numerous versions out there seem specifically designed to confuse, and increase revenues.

24% decline in revenues could mean that people are either:

1. Pirating Windows XP very easily or
2. Corporate customers buying PCs with no OS, and installing Corporate licensed XP or
3. People switching over to Macs and Linux.

I think it could be a bit of all the above. In 3 years time, if Microsoft does not release a really good successor to Vista, it could be Curtains for Windows! (TM). Will it happen?

Re:Windows revenue dropped 24% ??!?!!!

[Zigurd (3528)]

This is the first indication of Microsoft actually feeling a bit of pain due to Vista.

Microsoft could afford to misspend the money it took to develop Vista. But Microsoft cannot afford to allow Windows share in the installed base to erode 10 points from the current level. Apple has already taken advantage of that opening, and Linux, mainly Ubuntu, is growing even faster, though from a such a tiny base that the statistics are iffy.

How bad would a 10% decline be? It would leave Microsoft with 80% of all personal computers that access Web sites. That doesn't seem irreversible. But it is worse than it looks for two reasons:

1. That 10% contains a large number of opinion leaders.

2. The momentum would be hard to reverse.

If a 10% decline happens in the next 18 months, before Microsoft has a response, then Microsoft will be in serious trouble.

3 years is far too long for Microsoft not to have a response. Well within 3 years we will know if we have a long-term competitive environment for personal computer OSs, possibly with new entrants other than Mac OS X and Linux.

Re:Downward spiral?

[Jesrad (716567)]

It is the falling revenue that hubris is set in motion. It is by the gook of management that self-destruction acquires speed, the product line acquires bloatware, the bloatware becomes a warning. IT is by falling revenue alone that hubris is set in motion.

Re:Downward spiral?

[Bert64 (520050)]

Software can compete on microsoft's platform, if microsoft is not trying to compete with that software. Just you try producing a word processor for windows, you will waste thousands of man hours reverse engineering proprietary microsoft formats, instead of improving your product. And even if you do spend the time and effort to produce a product that is both superior and compatible, you will face a serious uphill battle trying to get anyone to use it.

If we had a truly open single platform, progress and innovation would have been a lot faster.
It was always inevitable that a more open platform would take over from the myriad of incompatible systems that were available years ago, unfortunately it was only the hardware that was open, or at least competitive, while software became more locked in than ever.

Microsoft have stifled the evolution of the open IBM compatible platform, not helped it. They stalled the transition to 32bit, and are doing the same with the transition to 64. They delayed other valuable technologies like USB and SATA by being way behind everyone else in supporting them. And they are keeping people stuck on the crufty legacy bios, because of their unwillingness to support EFI, or anything else that would be newer and better. How many other good technologies have been delayed or killed completely, simply because microsoft couldnt be bothered to support them, or supported them in such a half assed way as to make people falsely perceive them as useless.

They (along with other closed source vendors) are also stopping people moving to other superior architectures (some of which are more open than x86, but less widely supported because they wont run windows).

Re:

[pandrijeczko (588093)]

Shouldn't that be a 640Kb memory stick? Because you'll never need more than 640Kb.

Besides which, I cannot agree with your statement one bit - Microsoft makes damn good mice and joysticks!

Re:

[cp.tar (871488)]

Besides which, I cannot agree with your statement one bit - Microsoft makes damn good mice and joysticks!

Microsoft used to make damn good mice and keyboards. I don't know about joysticks.
However, the new Microsoft mice and keyboards that I've tried out are not that good, really.

Re:

[VertigoAce (257771)]

In November & December 2006, we deferred $1.67 billion in revenue for Windows Vista and Office 2007 into the 3rd quarter. This makes it hard to compare 2nd & 3rd quarters year over year, unless you look at it with the revenue moved back to the 2nd quarter. Once you take this into account, the results for this quarter were roughly what you would expect.