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Big spender Bill Gates’ Microsoft has made an unsolicited bid – at a cool $44.6bn – for Yahoo!. The offer is either in stock or in cash. I must say there comes a point where the sheer, mind-bendingly large sums of money that are involved (thanks to years of inflation) make it hard to relate to the sizes on offer.
And to think that $44.6bn is chump change to Gates.
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Compare and contrast the market cap of General Motors here. Says something.
So, basically, Yahoo is worth three times more than GM.
I don’t get it. I see GM cars on every street but I haven’t used Yahoo for years. Yahoo seems a little bit er… dated. I mean what services do they provide and why is MS after Yahoo?
I guess that this means that the takeup of Microsoft Live (who?) is somewhere between abysmal and non existent. I suppose that competing with Google by buying Yahoo is the next best thing.
I believe Yahoo! still has a large market share in some parts of the world. In the US it ranks second for searches with ~23% of the market, above MSN Search.
There’s also Yahoo Groups which has many many users and their services have a huge base of users across the globe for all its services, MSN is probably having trouble entering the market in some areas.
Yahoo is a massive brand, with gazillions of users and lots of advertising-generated dosh. It sure does look outdated, and the logo is a dog, but people do use it. I only ever use it these days to play online card games against psychotic strangers in the wee hours, usually in a chemically enhanced state.
Yahoo is also a leader in mobile internet applications (Yahoo! Go, IM, and Search to name but three) which is, as Bill’s nemesis Steve ‘Doktor Mad’ Jobs knows, the future of the internet. The clamour is on to invent Web 3.0 (context and localisation) , and Microsoft can’t afford to miss out. This is where we may start to see brands like Google fizzle and die, and brands like Nokia suddenly becoming even more potent.
CountingCats, spot on.
I was under the impression that Gates had just retired. I would be intrigued to know whether this move comes from him, Steve Ballmer, or somewhere else.
Seriously, though, the expression “dinosaurs mating” comes to mind here. The truth is that we have reached a situation where nobody whatsoever is afraid of either Microsoft or Yahoo, and they therefore thing that they can get it past regulators. In 2000 that would have been inconceivable.
Maybe not quite “chump change”, but this line from Microsoft’s letter to Yahoo is very telling
“Our proposal is not subject to any financing condition.”
In other words, no need to go to the banks or worry about the debt market; we’ve got $22bn in cash lying around we weren’t using.
Actually, from the last listing I’ve seen that is about Bill’s net worth (down from ~60bn at its highest). I’ve never seen the estimated net worth of Microsoft, I’d guess it is in the 100s of billions at least. I had heard before that Microsoft has always kept a considerable sum available as cash, I guess for whenever they feel like gobbleing up some smaller company.
Bill Gates is not Microsoft; his stake is now well below 10%, and the Gates Foundation owns exactly zero shares of Microsoft.
Just saying…
If you look at Microsoft’s balance sheet when they last reported (31 December 2007) they have $21 billion in cash and short term investments. They also have $11.6bn in accounts receivable and only $3.6bn in accounts payable, so another net $8 billion in short term assets there. So yes, no financing requirement for such an acquisition. (This is after a few years of paying substantial dividends, too. Whatever may be said for Microsoft, the business still generates an awful lot of cash).
Nick, Yahoo may well be worth more than GM. It’s not clear to me at all that GM is a long-term profitable company.
Except there is another $16 billion in “Other current liabilities” that I failed to see on my first glance at the balance sheet. I think a fair bit of that may be a provision for dividends to be paid. Whatever, it reduces the amount potentially available without borrowing back to about the $21bn in cash.
The number is amusingly close to what is being offered for Yahoo though. You almost want to think that Steve Ballmer sat there for a minute, thought “Hmm. Let’s buy Yahoo. How much have I got in my wallet. Okay, $21bn. Let’s offer them that”
I had a phone call from my NY stockbroker last week. He said buy Yahoo. I did. Thanks Jason.
Gates retired at the end of the fiscal year – June 30. And if you think that’s a weird fiscal year, you should have to deal with their month and quarter end accounts process… Sheesh…
It’s an interesting move. Yahoo search is popular but it’s awful compared to Windows Live Search which as a brand has a lot going for – or will do in the mobile world which is where they’re moving.
MSNs community based stuff just hasn’t worked, but Yahoo is really strong there with Flickr and Yahoo Groups which is where I suspect the interest has come from. This is a logical extension their annoucements to cooperate last year.
The general “buzz” inside the industry on this coast is positive and that it’s a nasty poke in the eye for Google and that’s reflected in their share price hit today.
Dave (who was in Mountain View yesterday and San Diego today on not altogether unrelated matters)
I suspect the penny dropped in the MS board some time ago… the current business model is not sustainable and they have to move with the times. Developing crap OS’s has a sell-by date on it as more and more of the software goes open source or becomes a cross-platform service.
The money is in providing massive service support, things which require massive physical plant. Searching, mail, arbitraging, price watching, and a thousand other services are where the mass market money is and everyone knows it.
It is also a strategic move because Google is starting to play potential checkmate moves in this arena and MS must respond or do what DEC did.
Daveon is correct – Yahoo groups reach out.
Even I am involved in a Yahoo group – and I still think there are little men in the computer box writing on the screen.
If Yahoo can reach me they can reach anyone.