Yahoo Bid shows Microsoft on the Ropes 402
Ponca City, We Love You writes "One day after the announcement of Microsoft's plan to buy Yahoo, there is an interesting piece from the NY Times analyzing the reasons behind Microsoft's bid and proposing that the bid is a tacit, and difficult, admission that Microsoft did not get its online business right and that online losses continue to mount while Google makes billions in profit. Microsoft "finds itself in a battle where improving its search algorithms and online ad software is not going to be enough," writes the Times. With the Yahoo bid Microsoft is trying to buy a big enough share of the market to be a credible alternative to Google with online advertisers. "This shows just how worried Microsoft is by Google," says David B. Yoffie. "Microsoft has faced competitive threats before, but none with the size, strength, profitability and momentum of Google.""
Regulators? (Score:4, Informative)
If MS buys Yahoo, the top 5 search engines will becomes the top 4.
Not to mention that many of the 2nd tier search engines are "powered by" Yahoo & MSN
In the early days it was IBM (Score:2, Informative)
Re:Eh? (Score:5, Informative)
Re:I think MS really SHOULD improve that ... (Score:5, Informative)
Microsoft has tried several directions when it comes to break into new markets but let's face it, they haven't done a very good job of it. Their money comes from the Server and Tools Division and the Business Division (Office etc.). And I don't think it's going to change... perhaps because they aren't used to competing on merits alone.
2004 10-K (has the 2002 to 2004 numbers) http://www.sec.gov/Archives/edgar/data/789019/000119312504150689/d10k.htm [sec.gov] 2007 10-K (has the 2005 to 2007 numbers) http://investing.businessweek.com/research/stocks/financials/drawFiling.asp?docKey=136-000119312507170817-22AR89VDNH3I307BANT6DSD928&docFormat=HTM&formType=10-K [businessweek.com]
Re:Eh? (Score:3, Informative)
Re:Eh? (Score:2, Informative)
MS Office 2007 has been insanely successful at retail.
The runaway best seller in PC software. Bigger than games. Bigger than anything.
Through end of November, U.S. retail PC software sales are up 10.3 percent year over year as measured in dollar volume, according to NPD. By comparison, Office sales are up 50.7 percent, by the same measure and in the same time frame.
"Here's the really interesting statistic," said Chris Swenson, NPD's director of Software Industry Analysis. "Over two-thirds of the dollar volume growth in the U.S. retail PC software market in 2007 can be attributed to Microsoft Office. In other words, the ratio of Office dollar growth to total PC software growth is 67 percent."
Office sales are so big, they make calculating broader PC software retail sales difficult.
Apple has had a great year selling Macs, which has helped boost Office 2004 sales. Version 2004 is doing so well that, ahead of the holiday sales period, Mac Office accounted for about 20 percent of all U.S. retail Office sales, according to NPD.
For Black Friday, Microsoft offered a surprising deal: for about 56 bucks, after rebates, Office 2004 Student and Teacher Edition and the forthcoming Office 2008 Special Media Edition. The new, top-of-the-line Mac Office version would otherwise sell for about $500. The Year of Office 2007 [microsoft-watch.com]
MS Office Home is $120 at Amazon. Retail boxed. Free shipping. Three seat license.
Replacement ink jet cartridges typically list for around $60 the pair. You do the math. If you can afford the consumables, you can afford MS Office. The added expense is trivial.
If his employer has a volume licensing agreement with Microsoft, your neighbor may qualify for a full version of Office for the price of shipping and handling.
They never did that (Score:5, Informative)
They started doing this once IBM gave them an exclusive contract to provide MS-DOS for the original IBM PC. By the time Compaq and co. had their clones ready, MS-DOS was the only game in town. Later, when DR-DOS came around, it started making *serious* inroads. Microsoft then made per-processor deals with the OEMs, making sure a copy of MS-DOS was sold with every processor, whether it *shipped* with the processor or not. This made it economically difficult for the OEMs to sell DR-DOS instead of MS-DOS. (DR-DOS was *far* superior to MS-DOS.)
It's these bundling deals that kept Microsoft at the head of the market all those years. Once they got a significant lead, it became impossible for any other competitor to create a competing product.
Microsoft was helped by some incredibly stupid decisions by other companies, true. (SEE Novell, and their handling of Word Perfect and Novell Office, for instance.) However, it' Microsoft's ability to warp the market to their own ends that has kept them on top, *not* giving the customer what they wanted. (They were so successful at market manipulation, the customer often never knew there *was* an option.)
When there's only one trail, the customer can't walk. That's what monopoly abuse is all about. We don't call it "lock-in" just to amuse ourselves.
Re:SOP (Score:3, Informative)
http://www.betanews.com/article/1079773789 [betanews.com]
Microsoft bought Webcorp in 1993, Windows for Workgroups was first released in October of 1992 according to this document http://support.microsoft.com/kb/126746 [microsoft.com] from MS. WfWG was in development for more than a year before they bought Webcorp and was released at least several months before.
What's more, WfWG was not just an add-on for Windows. It was really the entire basis of Windows 95. It introduced the VMM model that Windows 95 was basically entirely based on. Also, the networking stack of WfWG was the same stack that was built into NT, which they had licensed from Spider Software and was based on a licensed version of the BSD stack (predating the first open source release of BSD) and STREAMS technology.
Re:Eh? (Score:1, Informative)
Re:Eh? (Score:1, Informative)
I don't know how Microsoft compares to other companies in terms of total innovation, but they do introduce their own technologies from time to time and some of it actually changes the world. Give credit where it's due.
Re:The bid is public ... so (Score:5, Informative)
To answer your first question, they are called risk arbitrageurs [wikipedia.org]. They essentially buy the stock of the target company and short sell the stock of the acquiring company. They make a profit as the target's stock price appreciates to the offer price and as the acquiror's price decreases because of the costs of the takeover (e.g., cash paid out, dilution in stock value, debt taken on).
Their presence, and the reason Yahoo!'s stock only trades at ~$28 is due to the risk that the deal will not close. Deals have to go through a lot of vetting both by the government (DOJ, FTC) and by the parties making them. There is always a risk that at some point along the way either the government will not approve or one of the parties will get cold feet. This is especially true of hostile takeovers, which this offer is similar too, because the target is by its nature an unwilling participant.
As for why Microsoft is not buying in the open market, the short story is that there are a lot of rules and regulations that would just make it a stupid idea. For example, their are lots of disclosure rules that go into effect as an individual (or corporation's) stake in another company increases. Since Microsoft cannot buy all of Yahoo!'s shares on the open market all at once, it would have to fulfill these requirements and essentially announce to the world that it is acquiring Yahoo! before it has done so. This would probably cause a lot of investors to hold out from selling in an effort to get Microsoft to pay more for their shares. If Microsoft is far enough along in its purchases, it would have to capitulate because the cost of backing out and dumping all of its shares would be too high.
That's where the risk arbitrageurs step into the picture in a funcitonal way. Microsoft essentially announces what it will pay. All of the antsy Yahoo! shareholders sell to the arbitrageurs who then must try to help the deal close so they can make their money. This effectively allows Microsoft to offer $31 a share without incurring any of the hold out risk inherent in trying to buy in the open market.
Re:More than near-hostile... (Score:3, Informative)
From a business perspective, I think Microsoft has to fuck with Yahoo. The company's profit margins have been falling hand over fist for the last couple of years, and they've got way to much bloat, as evidenced by the fact that they will have to lay off 1000 people this year. They've gone through at least two CEO changes in the last year, and despite the increasing viewership of their sites, their ad revenue has been flat to decreasing. I think Microsoft must absolutely make management and culture changes to Yahoo unless it wants to see its purchase just fritter away and become the cash sink that AOL has become to Time Warner.
Re:Eh? (Score:2, Informative)
This AC poster is absolutely correct. Why the 'Zero' mod?
Let's include Apple here, while we're at it. I'm a long-time Apple user/buyer (who also ran Ataris, SGI's, and a SPARCstation or two), so I'll come with some facts here: For starters, some of Apple's biggest innovations were, in fact innovative, but they where that came from was in putting a better GUI on top of a product, or combination of products that already existed. With some rough edges developed out, and they were successful at it.
iTunes came from SoundJam, and it was owned by Casady & Greene, a company that had a number of winners, but lacked the money and muscle to take it to the next level.
Going back a bit further, to the Dawn of the age of Desktop Publishing, the one piece of equipment that really ignited this entire industry was the LaserWriter. The "Apple" Laserwriter, right? Sure, it was, that's true. But what was it, really? Answer: About a 50/50 collaboration between Canon and Adobe. One for the hardware (engine) and the other for a little old thing called 'PostScript". Apple drew up a front-end. The rest was history.
Bill Gates knew the guys at Apple were on to something, and it was Jobs that turned down Gates' advice to port to the Intel (way back there) and "take over the World." One of Microsoft's hugest cash cows was a direct result of their writing (heheh, sort of... [laughs]) a couple of apps, at the request of Apple, for Macintosh-only, called Word and Excel. And of course OS X is a great GUI on top of the Mach 2.5 kernel developed at Carnegie Mellon University with subsystems from 4.3BSD.
Anyway, AC was right. When I think of innovation I see smart guys, standing on the notebooks of other guys.