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Microsofts Backs Icahn's Bid to Boot Yahoo Board

 11:17 pm on Jul 7, 2008 (gmt 0)

See the whole story on Yahoo News [news.yahoo.com]

Ballmer told Icahn that a big impediment to any Yahoo deal was his concern that the current board could "mismanage" the company while the deal awaits regulatory approval, a process that could take nine months or more, according to Icahn.

IMO it's hard to say at this point if MS is serious or they just want to punish Yahoo's board for holding out.

[edited by: incrediBILL at 11:18 pm (utc) on July 7, 2008]



 1:57 am on Jul 8, 2008 (gmt 0)

If this moves forward the speculation is that the current board won't likely be around. The Fool had an intersting article entitled: Dead Yang Walking [fool.com]

Icahn and Microsoft have met over the past week, confirming Microsoft's renewed interest in buying either all of Yahoo! or simply its search business if Icahn is successful in getting his alternate slate of directors elected next month.

Yahoo! shares climbed on the news, which is a refreshing change for Yahoo! investors, but a wake-up call for current board members to start clearing their desks.


 1:31 pm on Jul 8, 2008 (gmt 0)

this is to show how is the boss, but the fact that Yang might retaliate for MS's hard ball tactics by giving the store away after MS has bought it, is a valid one. Yang is gone anyway.


 2:00 pm on Jul 8, 2008 (gmt 0)

It's not just MS wanting to punish the Yahoo board, it's many of the owners of Yahoo as well.

The Yahoo board doesn't own Yahoo, it's just meant to run it in the best interests of the Yahoo shareholders. Many of those shareholders feel that turning down MS's offer wasn't in their best interests.


 3:50 pm on Jul 8, 2008 (gmt 0)

Microsoft's renewed interest in buying either all of Yahoo! or simply its search business

Does anyone have any idea what this means? I doubt they are looking to buy search technology, and yahoo's value is in being a destination and reselling or copying other services like travel, music, dating, ecards, etc. so I doubt they would just buy the search traffic.


 4:18 pm on Jul 8, 2008 (gmt 0)

I doubt they are looking to buy search technology

I'm pretty sure that's exactly what it is, MS wants YST. I think the Softies have found over the past few years that, besides taking a heck of a lot of money, the effort to build a new search that can effectively compete with others that have a pretty long pedigree is a bit daunting.

I think it's fair to say that for a bunch of fairly competent folks it would be trivial to build a good search engine. But to build a good search engine in the reality of today's Internet just isn't as easy. As the Softies are dealing with the various types of noise and spam, the YST people are in some cases tweaking algos put in place years ago. And that's added that to the challenge of inventing an infrastructure that can ramp up from zero to billions of web documents virtually overnight.

In many aspects Y!'s already been there, done that, made mistakes.

[edited by: jimbeetle at 4:19 pm (utc) on July 8, 2008]


 4:19 pm on Jul 8, 2008 (gmt 0)

"Does anyone have any idea what this means?"

I think they want to buy the yahoo search results and display Live search results there. MS cant get enough advertisers interested in their program to bid prices up, they need yahoos traffic and their advertiser base (which is probably quickly eroding at this point).


 5:45 pm on Jul 8, 2008 (gmt 0)

Ballmer told Icahn that a big impediment to any Yahoo deal was his concern that the current board could "mismanage" the company while the deal awaits regulatory approval, a process that could take nine months or more, according to Icahn.

This may indicate what it was like negotiating with MS. It is not clear to me that Yahoo management has failed or that MS is better suited to run Yahoo.


 7:28 pm on Jul 8, 2008 (gmt 0)

It's one big cluster _ _ _ _. Whatever happens, I think it is going to drive Yahoo! into the ground. MSFT won't know what to do with it, Yahoo! is likely to distracted to make any headway right now. Unless you have some really sweet incentive to stay on after MSFT would take over all or part of the company, why stay on? If all MSFT and Y! search went through one interface, it would be one less sub-par ad management system to deal with.

How hard is it for them to look at what Google has in AdWords and come up with something close?


 9:10 pm on Jul 8, 2008 (gmt 0)

I htink they should strike a deal with google, just for the heck of it.


 2:01 am on Jul 9, 2008 (gmt 0)

Has anyone looked at the stock performance for YHOO and MSFT for the past 5 or 10 years? From what I'm seeing, Yahoo! is kicking Microsoft's butt [finance.yahoo.com] so how can Ballmer, Icahn et al sit there and say they will do a better job with Yahoo!?


 5:05 pm on Jul 9, 2008 (gmt 0)

So Ballmer wants yahoo! after all, so much for an "independent" strategy.


 7:25 pm on Jul 9, 2008 (gmt 0)

physics, stock is nothing but speculation. Look at the real numbers - cash, revenue, profit % etc, you'll notice that Yahoo! had a LOT of hype in the last 10 years, while it is not going to be easy to find another solid performer like Microsoft.

profit margins 28.3% MSFT vs. 15% Yahoo
revenue $58 Bln MSFT vs. $7 Bln Yahoo
return on assets 20% MSFT vs. 3% Yahoo
return on equity 45% MSFT vs. 11% Yahoo
total cash $26 Bln MSFT vs. $2.6 Bln Yahoo (10 times!)


 10:00 pm on Jul 9, 2008 (gmt 0)


very right, MS financial figures look fine thanks to their monopoly position.

This may change once Google will come up with a free improved linux type of operating system with enough software included to cover what the normal consumer needs.

Google has the cash and by that moment MS will come under pressure.


 1:01 am on Jul 10, 2008 (gmt 0)

True aleksl it wasn't an apples to apples comparison. But just because MSFT makes much more revenue than Yahoo! doesn't mean they will run the Yahoo! portal or search engine any better. Microsoft makes most of it's money on software licensing, something Yahoo! can't take advantage of.

More to the point, last time I checked more people use Yahoo!'s portal services than Microsoft's despite the fact that the vast majority of people are using IE on Windows (and thus the default home page is msn). In fact, on Alexa (yeah I know everyone hates them but...) the top 5 are currently:

1) Yahoo!
2) Google
3) YouTube
4) Windows Live
5) MSN

Can anyone really look at that list and decide that Microsoft is the company to run Yahoo!? Microsoft has had every chance to dominate the internet space but has consistently blown it while upstarts have taken the top 3 spaces.

Now I'm guessing what everyone is thinking is "Why does Google make so much more money than Yahoo! when Yahoo! gets more traffic? Yahoo! must be mismanaged." Fair question, but lets look at the core business of Yahoo! vs. Google. Yahoo! is, for the most part, a portal and a major web email provider. Most people go to portals to view information on the portal, not leave the portal by clicking cleverly placed text ads. Most people go to their email accounts to read their email and consider advertising an intrusion. Google on the other hand is, for the most part, a place people go to search and thus are very receptive to clicking cleverly placed text ads. The thing that confuses the issue is that Yahoo! has a search engine and Google also has all of the features of a portal. In summary Yahoo! is a portal with a search engine while Google is a search engine with a portal. Guess which has the potential to make more money? Unless Ballmer et. al can prove that they are somehow capable of totally transforming the revenue model of Yahoo! so that it will make Google like profits per visitor then I can't see how they are better qualified to run the company. The fact that Windows Live and MSN have failed to cash in like Google has pretty much proves that Microsoft isn't qualified to do a better job.

And back to another point about stocks aleksl. Yes stocks are speculation but to most stock holders the price of the stock and the trend of that price is the main concern. This is why I pointed out that stock graph in my previous post. As an individual investor I would be much happier if I had bought Yahoo! 5 or 10 years ago, especially if I owned 4% of the company.

Yahoo!'s P/E is about 32, for Google it's 37 and for Microsoft it's about 14. So Yahoo! is overvalued compared to Microsoft but that's not a fair comparison. Considering that it's undervalued compared to Google and I'd think stock holders would be happy with Yahoo! right now (if it wasn't for all of this FUD caused by Icahn and Ballmer).

The more I look at this the more it's clear that Microsoft's bid for Yahoo! has nothing to do with sound business practices that would benefit the stockholders and everything to do with a campaign by Ballmer and Icahn to destabilize Yahoo! and maybe grab some more eyeballs if they actually succeed. If they get Yahoo! they win. If they don't they still win.

Lord Majestic

 1:23 am on Jul 10, 2008 (gmt 0)

MS financial figures look fine thanks to their monopoly position.

So are Googles - which is why more competition is necessary and which is why Google is doing everything they can to preserve current situation.


 1:52 am on Jul 10, 2008 (gmt 0)

Lord Majestic,

both monopolies are fragile as new products may emerge elsewhere and could take over their core markets within months.

The resistance against Vista is massive and the market is wide wide open for another OP system.

So is the search market. Always open wide for better search results or new products land hypes.


 2:02 am on Jul 10, 2008 (gmt 0)

The resistance against Vista is massive and the market is wide wide open for another OP system.

This isn't a new trend as there have been several Windows upgrades with massive resistance, especially in large corporations, because not only of the cost of the software but the cost of IT upgrading all the machines.

Some of my machines that work just fine have skipped an update or two for the same reasons which is why I have machines with Win 98, 2K, XP and Vista.

If they aren't broke I don't fix 'em which is far from massive resistance.


 1:12 am on Jul 11, 2008 (gmt 0)

physics, excellent observation on why Google makes more money then the others.

If I were investing in stock market heavily, I would be much less happier sitting in a volatile Yahoo! stock knowing they are loosing audience day by day; prior performance doesn't guarantee future results, especially these days of funny fiat money and even funnier paper "stocks".

Now, if you combine Yahoo, Live and MSN, Microsoft would own #1, 4 and 5 sites on the web. Further down the line they'll also get Yahoo! Japan at #10. Google will own #2 and 3 above, plus #9 Blogger.com and #11 Orkut, and a bunch of smaller sites in first 100. Maybe, maybe Microsoft will have a chance to compete.

Then I would go about scraping competing properties in favor of something I already have that is of value. Example: Yahoo! has excellent news and finance sections, MSN doesn't. Yahoo! has Hotjobs, MSN licenses content from Careerbuilder - scrap the licensing. You have excellent Yahoo! Shops and Sports, keep that, scrap MSN's parts.

Also, we'd need to position both sites, you can't be all to all people. I would do what New York Times did with About.com - make one brand top-notch, the other focus more as MFA on gossip, lower quality higher paying blah content, etc. Separate brandable properties into their own entities, so that it is not Yahoo! Hotjobs, or MSN Hotjobs (god, no!), but Hotjobs, an MSN brand (smaller print at the bottom).

Then, you need to focus on email. You have to do better than GMail. I personally don't like Hotmail, but fine, keep it in the MSN package "for AOL-type users" ;-) Yeah, and these deals with MSNBC and Fox News will fit this profile nicely, if you get the drift ;-)

Then you combine messengers and get a heads up on everyone there.

You get one strong video content site with Yahoo! Video.

Then, you clearly loose to Google on Blogging/Photo sharing front. Alas, searching Yahoo! for "blog" turns up Google's blogger.com in the first position - that is a NO-NO if the war is on.


By doing all this you see if you can scrap lots of resources you don't need or efforts you duplicate.

Then you change Search. You keep Yahoo! a portal, and keep Live a search. Nothing more, live is a search, THAT'S IT. Then you use Yahoo! Answers to train your search technology to answer as close to how people answer.

And whatever you do, you MUST rename a signle signon from "PASSPORT" into something else. For god's sake, Passport is associated with government, repression, border control, fees and taxes, whatever else but not a freedom of The Internet.

And THEN, you try to catch Google in over 100 other countries. Good luck with that.

Who knows, anyway.

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