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Microsoft Businesses The Almighty Buck The Internet Yahoo!

Falling Microsoft Income Endangers Yahoo Bid 195

Posted by kdawson
from the micro-who dept.
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."
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Falling Microsoft Income Endangers Yahoo Bid

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  • by Baldrson (78598) * on Tuesday April 29, 2008 @02:56AM (#23235488) Homepage Journal
    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* (Score:5, Insightful)

      by thermian (1267986) on Tuesday April 29, 2008 @03:12AM (#23235558)
      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.

      • by lightversusdark (922292) * on Tuesday April 29, 2008 @03:17AM (#23235580) Journal
        Whoosh!

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

        That was the stealthy sound of sandpaper-dry sarcasm whistling coarsely overhead.

        You are right, though.. There was very little sanity going on there, and we all suffered because of it.
        • "There was very little sanity going on there, and we all suffered because of it."

          Well, many did.

          Others made a killing billing obscene hourly rates.

          I really can't complain too much. It's a psychological hit to go from billing $175/hr back down to $75 (and even $50 in the lowest of the lows of 2001-2) but that's fake bruised-ego pain. Not real suffering. Not suffering like a lot of Americans go thru during bubble-busts.
        • by mweather (1089505)
          Speak for yourself. I sold short.
    • by pubjames (468013) on Tuesday April 29, 2008 @04:16AM (#23235784)
      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.

      • by Jesus_666 (702802)
        Except if you happen to live in Europe, in which case it is funny. Well, unless you realize that a falling Dollar might negatively impact the country that creates 90% of our culture and goods, which is sad on many levels.
        • 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
          • by 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: (Score:3, Interesting)

              by 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
              • by pubjames (468013)
                Of course currencies and economies are never static, but I never used that word, I used the word "stable". All governments aim for strong, stable currencies. If you get huge fluctuations over relatively short periods of time, then something is very wrong.
                • Even then it isn't that simple.

                  Again, take China.

                  If they stopped their artificial manipulation (like the US and EU would like), there's no doubt that the Yuan would increase in value. Maybe even dramatically. And not instantly, but over a couple years time.

                  It's a bit tortured, but a decent sports analogy would be the team that purposely loses game after game after game in order to win some excellent draft spots.

                  But in China it's not JUST about future gains, it's also about social engineering. Among other th
          • by Burz (138833)

            As the dollar weakens, the US becomes more and more attractive for foreign investment.

            The US was already on its way to pauperization through foreign investment. If the rest of the planet invests even more (presumably with dollars they are eager to get rid of) then inflation would run rampant and things become too expensive for the locals.

            As much as I like the sound of your wildfire analogy, its much more serious than that. You can't motivate people in a purely capitalist society without a stable currency that engenders trust. That is what we are facing: a profound breakdown of confidence an

        • Huh? How does this shake China?
          • by Jesus_666 (702802)
            "Creates", not "manufactures". Also, don't forget the culture. There aren't too many Chinese TV shows and movies to be seen around here and the radios haven't even heard of Jay Chow. Apart from the music, where I tend towards other countries, entertainment-wise the States rule supreme. A good movie has a much higher chance of being from LA than from Munich (or Beijing, for that matter). Same goes for TV series.

            And the more non-throwaway goods are usually designed in the USA or Japan and manufactured smewh
            • Give it 10 years. The US should have learned their lesson with the japanese way of "assemble - imitate - innovate - buy out", which happened for them after WW2 and into the 60s.

              Wonder what industry of the US left by the Japanese will be taken over by the Chinese. Cars and electronics are taken.
      • by 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.
        • by pubjames (468013)
          Five years ago 100,000 USD was almost 100,000 EUR, which is a big annual income. Two years ago it was 85,000 EUR, still pretty high. Now it is about 64,000 EUR.
          • by maxume (22995)
            Compare the dollar and euro salaries for jobs. The numbers make more sense now than they used to(i.e., people making 60,000 dollars do about the same work and have about the same buying power as people making 40,000 euros).
            • by timeOday (582209)
              It's hard to compare, since Europeans pay so many taxes, but then Americans pay so much for health care and education.

              Since the US economy relies so heavily on imports, I'm surprised the devaluation of our currency hasn't caused more inflation. We've felt the impact through gas prices, certainly. But imagine if imported cars, clothing, and electronics had shot up that much. We'd be wiped out. I noticed, for instance, that motorcycles now cost significantly less in Euros than US Dollars, but the differ

          • by CastrTroy (595695)
            You really have to account for the cost of living in with your calculations. Even though the US dollar and CAN dollar are at par, most things in Canada still cost more than they do in the US. So you would be much better off living in the US making $US 100,000 than you would be in Canada making $CAD 100,000 even though the currencies are worth the same amount.
    • Re: (Score:3, Informative)

      by 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
      • Oh, there's an easier way for this: Just be stringent with the part that deals with hiring people with special skills or skills that no or or at least not enough US citizens can provide. And I'm not talking about "being cheap". I mean certain key skills. And you'll soon see far fewer H1Bs being issued to cheap slaves.

        For the record, I'm no US citizen, and I do actually think that this might increase my chances for a visa. If I ever wanted one, that is.
    • It's clear that if Bill Gates could just get the H-1b caps lifted, the best and brightest from around the world could come to the US and be paid $100k straight out of college 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.

      Ahh.. so not people over investing in any idea that came along, no matter how outlandish it was, just because some of these ideas might pay off in a big way?

    • Re: (Score:3, Insightful)

      by 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.
  • Not only the Yahoo! bid. Wasn't MS built up kinda like a pyramid scheme, with their reliance on stock options as payment for top professionals and other things like that? Someone calculated a couple years back by how much about the MS stock can slip before it sets a downward spiral into motion that will wipe the company out. Explained to me at that time while they are so hell-bent at domination and expansion, no matter the cost. Given their makeup, if MS falls, it will fall hard and far.
    • by Jesrad (716567) on Tuesday April 29, 2008 @04:24AM (#23235818) Journal
      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.
    • When Microsoft falls, it's going to fall big-time, and the size of the crash will take everyone by surprise. Microsoft is still a company with basically two extremely profitable cash cows (OS and Office) which are both under threat. Both of these huge cash flows could disappear fairly quickly. I predict their profits will stay stable or show a slight decline for two or three years, and then suddenly they'll be a huge drop in profits - perhaps a 40% drop, and then everything will go to crap for them over the

      • Microsoft is still a company with basically two extremely profitable cash cows (OS and Office) which are both under threat.


        What, exactly, is a serious threat to Office? OpenOffice? IBM's new Lotus thing? I don't think so. Neither of those will be a serious threat to Office's market share in the next year or more.
        • by pubjames (468013)
          What, exactly, is a serious threat to Office?

          The death of Office application suites.
          • The death of Office application suites.

            That's not realistically happening anytime soon. It's just not. Few if any businesses are in a hurry to get away from them.

            Further, the combination of Office 2007 and the newest version of the dev tools to go with it (VSTO 3.0) open a lot of new possibilities for what an Office suite can/should do for a business -- and what's more, a lot of these are the kinds of possibilities that play extremely well to the pointy-haired boss crowd. Once that dam breaks expect Offi
            • by pubjames (468013)
              Let me guess, you have some kind of vested interest in MS Office...

              In case you haven't noticed, the cool developers aren't working on Windows apps any more. There's a new development platform called the web.

              Sure, it's easy to laugh at stuff like Google Docs today. But that stuff is the future, and it will be the death of MS Office.
              • Let me guess, you have some kind of vested interest in MS Office...

                Not so much, no.

                I'm a consultant. In any given years I spend time working in the offices of a lot of different businesses. Some of these will be Fortune 500 companies, some will be medium or small. This gives me a pretty good read on where a variety of different businesses are going.

                Number of these businesses going to Office 07: several. Number of these businesses even looking at making a transition to something like Google Docs: zero.
                • by pubjames (468013)
                  Well, perhaps we have different perspectives.

                  A lot of my clients are fast moving technology companies and they certainly are moving many things onto the web, and that process is accelerating.

                  Of course big enterprises and smaller companies in slower moving industries will be the last to move. But it is only a matter of time...
                  • Well, perhaps we have different perspectives.

                    We definitely do, and I'm glad to hear yours. Stuff like this is what keeps me coming back to slashdot. I see a pretty good variety of businesses in my work, but there's a lot more out there I don't see and it's interesting to hear what else is going on out there.

                    I think most companies at this point are using the web for some things, and not others. Some of this will definitely shift as new technology emerges (for example, ten years ago there was a pretty star
                    • by pubjames (468013)
                      There you go - different perspectives.

                      Automatically processing email orders using a plug-in for Outlook is in my opinion a pretty horrible technical solution, and one I would never implement or recommend.

                      Much better to have an online form that people can fill in when submitting orders, which can then go directly into SAP or whatever. Including the Outlook application in such a solution is, in my opinion, a horrible hack.
                  • by timeOday (582209)
                    Will the movement to the web actually threaten the Microsoft monopoly on office apps anyways? If nobody has been able to write a good replacement for Outlook and Powerpoint until now (and no, ooimpress isn't), why will the be able to do it on the web?
        • by EMeta (860558)
          The real threat to Office is Office 2000, which still is more than the great majority of companies need.

          I work at an engineering company, and we even use Excel's programming functions regularly for project management. But we'll never upgrade to 2007. No need. Microsoft's empire was built on growth, and Office, just like XP, got to a good enough stage many years ago. They still have some opportunity in the developing world, that hasn't already bought the software, but they're built out here.
  • by Dana W (1281070) on Tuesday April 29, 2008 @03:05AM (#23235530)
    Lets all say that together, shall we? "Falling Microsoft Income" Beautiful........... Do I get two more wishes?
    • Re: (Score:3, Insightful)

      by cheater512 (783349)
      What more could you wish for? :P
  • by SerpentMage (13390) <ChristianHGross AT yahoo DOT ca> on Tuesday April 29, 2008 @03:13AM (#23235564)
    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.
    • Recent economic worries tend to make people risk adverse and tends to pop the bubble of any high PE stock. Being able to trade away high PE stock for a good price gives YHOO shareholders a nice sleep and that is all that is keeping the YHOO stock from crashing.
    • by Solandri (704621) on Tuesday April 29, 2008 @03:58AM (#23235728)

      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.

    • by Chrisje (471362)
      Gravity doesn't drop. At least not in that sense of the word. :-D
    • by Yvanhoe (564877)
      There is more to it than just money. The people who founded Yahoo 13 years ago are still in for the ride. If they sell it to Microsoft, they know the adventure will end there. After all, they already are rich enough, I don't think they want more money, I think they want independence and fun.

      And battling Microsoft is a fun that many people here can probably understand!
      • It is not about money. Not when you are that rich anyway. It is about the vision of what your company should be. I am not saying companies do not seek revenue, but they seek it by a certain way. Publicy traded companies may give up their ways in exchange for revenue - either in the short or long term. But the founding fathers rarely do so, whether their vision is right or wrong, they tend to cling on.
    • by Weedlekin (836313)
      "Yahoo is being too arrogant for its own good."

      It could also be a matter of them really not wanting to become part of MS because they're aware of what tends to happen, or that they know how desperate Ballmer is to find some way of competing with Google, and that there aren't many companies he can buy with any realistic chance of giving them that capability.

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

      The question from Microsoft's viewpoint is whether
  • This is it, Steve, take the bone that's been thrown to you, and use it as an excuse to call the whole thing off.

    I know...go buy Comcast!  That would be cool.  I think I would actually like you better as my ISP.  And that's saying something.
  • by jkrise (535370) on Tuesday April 29, 2008 @05:08AM (#23235994) Journal
    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: (Score:2, Informative)

      by iamthelaw (784705)
      No drop. It's an illusion. This quarter last year MS recognized revenue from upgrade sales of Vista that had not yet been realized. The amount of growth was normal and expected; MS met earnings expectations which accounted for the difference.
    • by Zigurd (3528) on Tuesday April 29, 2008 @07:24AM (#23236588) Homepage
      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.
      • 1. MS management sees this figures early. This decline must have been known for months, we just get the bit they can no longer hide. So there may be more we (and shareholders) don't know about.

        2. This decline has been registered despite extra sales of Windows XP that people bought before MS "fixed" the issue by allowing XP licenses in parallel with Vista (only Pro versions). To clarify, Many new PCs have forced us to pay the Vista tax, and early adopters/sufferers paid for an XP license on top. Sales, h
        • by cheros (223479)
          Meanwhile I had some more coffee and got back to the original article.

          I don't know how they can clock up a 24% loss with Windows, which is much more "automatically" sold than Office. Something doesn't add up here (pardon the pun).. Maybe using those flawed OOXML math interpretations on an old system with the Intel FPU bug?

          I bet it said "Vista capable" :-).

    • Apple sales are up and Asus alone, sells more Linux machines than Apple sells Macs. So clearly the Linux desktop market is booming. I won't be surprised if Apple and Linux combined has 30% of world desktop sales this year.

      However, in North America technology is always lagging the rest of the world, so you likely won't notice anything there for the next 5 years.
      • by revscat (35618)

        Apple sales are up and Asus alone, sells more Linux machines than Apple sells Macs.

        You keep saying this. It wasn't true then, it's not true now. Apple sold 1.4 million portables in Q2 2008, Asus sold 350,000.

        Quit lying.

      • by Dan Ost (415913)
        Could you please post links to the sales figures you're referring to?

        Thanks.
    • by jimicus (737525)

      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?

      Certainly not the second one. Corporate Windows licenses are upgrade-only - you still need either a retail or an OEM license on the hardware.

      I'd imagine it's a combination of a two main things:

      1. Vista has few, if any, compelling features.
      2. The economy isn't exactly in the healthiest of states.

      This combination has businesses and individuals alike asking the question "What benefit is there to buying a [business: whole lot of] new PCs rather than just adopting a policy of replace when broken and not befo

    • It could also be that the recession is making people buy less new computers. I suppose you'd have to look at overall desktop sales. According to this [bloggingstocks.com], growth in U.S. sales were down to +3.5% last quarter (yes still growing, but growth is slow), but worldwide growth in PC sales are still up. So I suppose there's some truth in the people are switching to alternate OSes argument or installing corporate licenses.
    • 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.

      Some other reasons:

      1. Fewer people are buying PCs (maybe due to the recession). OEM Vista revenue is hurt.
      2. Fewer people are upgrading to Vista. Again, the recession could have a factor here. Also, businesses and consumers who were interested in upgrading are probably waiting for SP1 which was released after the quarter ended.

      I found intere

  • Why isn't this a news article by itself?

    Why is Windows revenue down? What was the official reason, and official response?

    Is this a normal dip that happens this time of year? Are they blaming the recession? Are they expecting an upswing in the next quarter?
    • Re: (Score:3, Informative)

      by 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.
    • All comparisons are made against the same period last year (3Q 2008 vs 3Q 2007) for clearer analysis. This would remove any normal changes that tend to happen annually.
  • ... I guess "Yahoo" never imagined that their name would once be yelled out so loud, when the hostile bid by MS on their company failed...

    Yaaaaaaahoooooooooooooo!

  • ...and in late breaking news, Microsoft has reexamined their P/L Excel Spreadsheet and announced that the averaged annual profit level of $771M across their 85 Group Companies may actually be overstated at $100000M and should be nearer $65535M
  • The economy must be bad if this story doesn't even get a "haha" tag.
  • Now here's a twist.

    Yahoo offers to buy Microsoft! :D
  • by Godji (957148)
    This is very easy to fix! Put a "PayPal: Donate now!" button on the WGA notification pop-up. There ya go, fixed.

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