One thing about Jerry Yang that I always have admired is that he cares. He cares about his employees. He cares about his products. He cares about his shareholders. Most of all he cares about building a world class company that can be great at what it does.
If you look at Yahoo singularly, it is a great company. For he and David Filo to build a company with more than 6B in sales and more than 25B in market cap is an astounding feat . Unfortunately for Yahoo, it has had to weather both the Internet Bubble Bursting and the emergence of Google as a force in search and online advertising.
These are both issues because Wall Street has made them issues. The bubble speaks for itself. Google is a Wall Street issue for Yahoo because Wall Street wants Yahoo to keep up with the Googles.
That's a problem for Jerry. Building a world class Yahoo to be the best company it possibly can be using the management skills that Jerry and company have is a far different challenge than optimizing the stock price. Particularly when Google is your stock comp.
Which is exactly why Jerry and David should sell to MSFT.
If there is one thing Microsoft does well , its ignore Wall Street and invest in its corporate strategies. It has so many huge lines of business, that Wall Street has learned to just let those that need to germinate do so. XBox. MSN. Online. Microsoft gets more leash from Wall Street to develop businesses than any company on the planet.
So the question isn't whether Yahoo should sell. It should. The only question is what the structure of the deal should look like so that Jerry and David can achieve many of the goals they set out to accomplish on the net under the MSFT umbrella. Jerry definitely is about customers first. This is his chance to show it. This deal accelerates his opportunity to get customers where he wants to take them if he negotiates it right. Something I dint think would be that hard. There is too much upside for Microsoft to nitpick the non financial deal points.
What about Google ?
Google also is a company that wants to put its strategic goals ahead of what Wall Street wants. When the stock is trending up, that's easy to do. If we are in the middle of a market correction of any severity at all, then Google could get hit with its own Wall Street "double whammy".
First the downward pressure on its stock price. After several days of seeing the stock down 50 bucks during the trading day, Google is feeling exactly what Yahoo felt when the bubble burst. That queasy sense of fear around the company. The questioning of what could possibly happen to the stock, the impact on employee options and the inevitable questioning of Google traditions. 10 to 20pct of your time on other projects ? Not when the stock price is down 200 dollars in the past 3 months. Again.
The 2ND whammy would happen if Yahoo was no longer a stand alone stock. Even if the Google stock price suffered, there was always the comfort of "outperforming Yahoo". Wall Street, employees, small stock owners always had the Yahoo stock comp to give it confidence. If its not there, all the eyes are staring right at Google evaluating and questioning every number and corporate action.
Its a level of scrutiny and pressure that can and will change the corporate culture of any company going through a maturation phase.
So Yahoo should say yes. Its less about the money than about finally achieving the corporate goals set out more than a decade ago.
One time Jerry told me that Yahoo stood for You Always Have Other Options. This time Yahoo doesn't, but their customers options could improve exponentially if Yahoo says yes.
Why Yahoo should say Yes to MicroSoft
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Reader Comments
(Page 2)22. I am convinced that GOOG gets the triple whammy. They might even cause the burst of current Internet bubble, and be caught in the crossfire in the worst imaginable way. Let's face it - GOOG was always overvalued, especially as a one-trick pony (monetizing search through text ads). $200 appears to be much more realistic than, say, $495.
A while ago, I had the "pleasure" to meet a number of Googlers as part of a project, and well, I can only say that they are the most arrogant, unethical, and unprofessional bunch of guys I have ever met.
I love to see the tide turning. It is good news.
Posted at 11:54PM on Feb 4th 2008 by Not a GOOG fanboy
23. As a search marketing professional, Yahoo's search results are a joke. page one might be good some of the time but page two is a dumping ground and page three is worse.
Some new idea people would do Yahoo some good. Besides, Microsoft has the capital to wage an effective war with Google and Yahoo doesn't have a chance.
Posted at 12:29AM on Feb 5th 2008 by Affordable SEO Consulting - Terry Reeves
24. Antitrust issues! This merger may never happen! The internet is just now taking off and the last thing we need is microsoft cornering it, reducing competition, and increasing internet advertising cost. The Feds will be looking down the internet sector throat just to get at Microsoft and enforce "antitrust" laws!
Posted at 1:24AM on Feb 5th 2008 by Mitchell
25. Yahoo and MicroSoft will make a good team. Yahoo has to say yes. Google will try and stop it.
Posted at 2:21AM on Feb 5th 2008 by John
26. wow, can't believe someone who runs companies and is successful can even fathom caring about employees, the product and the shareholders.
would you like to buy a scrappy major metropolitan newspaper?
http://www.suntimes.com/news/metro/776022,stng-update-020408.article
(really, imagine the possibilities of owning the Chicago paper that is NOT the Tribune. Besides, its Internet presence is lacking sorely, and few people if any who are in a position to buy the company have any idea how to make the Web work for news.)
Posted at 3:01PM on Feb 5th 2008 by james
27. I know I'd say yest to 40+billion. I think the Facebook guy is crazy to still be working there. Sell sell sell. It worked pretty well for you Mark. Take Care. rivaljabs.com
Posted at 5:35PM on Feb 5th 2008 by Jeff DeMeo
29. What is everybody stoned out there?
Look all you Googlites, Microsoft isn't going after Yahoo for search but as an avenue to deliver goods and services to a market that has been herded into an online coral.
Google search works but isn't the cure for the information challenged people.
Who the $%%$ clicks past the second page of googles search results?
I certainly do not click any of the paid ads on top because they tend to be redundant. If I am looking for a hp notebook , there it is in the first few results, hp.com. Plasma tv, what is there any other real choices, 99% of people go to circuit city, best buy or someone in the natural top results.
Google is selling snake oil to the big fish companies for billions and companies like reachlocal are making 100 millions
selling to the little fish-small business owners promising that there business will be made or broken based on search result placement.
Look at google as the discovering the americas. The Google model is based on colonization of the entire search continent.
As us, the users, get tired of the ad taxation of irrevelant search results grows heavier, a revolt which is happening now, will break this googleamericas down into territories, then states, cities and towns and eventually grouped back into regions of the world. We will soon not throwing tea into the sea but google's useless search results.
Search is has just beginning and google is not ready for semantic web making you thing that horse and buggy will never be replaced.
HISTORY REPEATS AND REPEATS BUT MOST IMPORTANT
"E-VROLUTIONIZES".
Alright enough ramble, it's getting late here in the windy city and will end with this.
Good luck Google. You are like a public library and are not a business.
Amazon, Cars, Overstock, Pricegrabber, Costco, Target, Ebaystore and others are asserting there right to be free of you eliminating ad taxation.
All I can say is know your history and Napoleon Bonaparte's inventing the system of street addresses. This is the future of search results...physical and numerical addresses and name in the subtext descriptions.
HUH, time to go...
Posted at 1:19AM on Feb 6th 2008 by Peter
30. I think as a responsibility to it's shareholders, yahoo should accept. I don't see it getting any better than MSFT's offer, in the near term, anyways. What does that mean for the employees? Alot will lose their jobs. Hopefully, the stock premium will help make up for some of that loss and they can move on to new positions with other companies. With the serialization in the valley, it's like "what's Next?" Let's move on, shall we? Got vision? :-)
Listening to: Monster Hit by Shpongle
31. Jermaine Fanfair - Yahoo should stand up for itself in this one. many others have done the same. It sets a terrible precedent for similar companies growing in popularity and strength and not yielding to the numbers. You have to admire companies like Apple for its perseverance.
Posted at 11:40AM on Feb 7th 2008 by Jermaine Fanfair
32. Jerry should negotiate for whatever he can. At $44B on $6B of revenues, there is no real justification to say "No" to anyone. Yahoo's core earnings won't grow to justify that price. Ever.
For as much as people have slammed on Yahoo's stock price performance over the past few years, after a good look, it becomes clear that even the pre-bid value of the stock included more dreams than reality. If Microsoft thinks that Yahoo is a good investment at $44B, it must be counting on huge cost synergies - not massive revenue improvements.
Posted at 3:40PM on Feb 7th 2008 by Jonathan
33. I am anti giant corporation and I like Google, (I don't like the big amount of data that is collected about me, I like google search); but I think Yahoo should sell. This will make Microsoft bigest player on the internet if they play hard with Yahoo Directory and with all other engines that get top results from Yahoo (AskJ, Overture, Lycos, etc).
34. Robert Cringley blames Mark Cuban for the demise of Yahoo!:
http://www.pbs.org/cringely/pulpit/2008/pulpit_20080208_004240.html
Posted at 2:38AM on Feb 8th 2008 by Jon Noel
35. I often agree with you, but here, I have to disagree.
I don't want to see Microsoft swallowing up anything else, or to get any more power. In my opinion, they build products set to self-destruct in a finite amount of time, to keep sucking money out of their customers. They expect customers to pay for software that doesn't work, instead of testing it properly and fixing the bugs before putting it on the market. The list just goes on and on. The dumbest thing I ever did was start my computer life on Microsoft products instead of Mac, and I've paid on every level since, in frustration as much as financially. I've only experienced a complete lack of respect for customers from them.
Yahoo going into Microsoft hurts Yahoo's customers. I have no doubt that Microsoft will implement all sorts of changes to Yahoo, especially in a way to get money out of people who have accounts with them or use them, and what's been wonderful and unique and worked with Yahoo will be destroyed.
I'm very much against this.
Posted at 1:00PM on Feb 8th 2008 by Devon Ellington
36. At first glance I don't think Yahoo should sell. I believe it's time for a change at Yahoo Inc. but not one as drastic as allowing Microsoft to purchase Yahoo.
Michael Dell in his book "Direct from Dell" made a comment about different levels of management. Keep in mind this is not a quote but Michael Dell says something along the lines of, there is $100 million dollar managers and $1 billion dollar managers. We were running a billion dollar company with $100 million dollar managers. Mr. Dell made a change at the top and it worked.
Another theory that comes to mind and can be applied to the Microsoft/ Yahoo proposed deal is talked about by Joseph Schumpeter who references others before him - "Creative Destruction".
In my opinion I think this sort of logic needs to be applied to Yahoo Inc. and it’s not time to sell. A time for change yes time to sell no. That's my first glance look at that offer.
Posted at 6:21PM on Feb 8th 2008 by Jerry Calliste Jr.
37. [Jerry definitely is about customers first.]
You're so right, Mark. Except, of course, when Jerry's customers write blogs that the Chinese government doesn't like.
Then Jerry happily turns over the customer's IP address so the Chinese government can throw him in prison.
Better that then give up a fat government contract, right, Mark? Isn't that how business is done?
Posted at 2:21PM on Feb 9th 2008 by Wen Ho Lee
38. This merger has the potential to sink both companies. M$ will have to borrow $20+ Billion to complete the deal. Yahoo's technology will be destroyed by the forced conversion from BSD/PHP to Windows/.Net. M$ will do the same thing they did to hotmail and the predecessor to MSN. Destroy the technology because it does not run on Windows. The merger will consume M$ entire focus for a long time and drain it of cash. Yes, I am a pessimist.
Posted at 2:33AM on Feb 10th 2008 by Joseph Simkins
39. I am reasonably sure that many such as myself will abandon Yahoo if it becomes part of Microsoft. How much this will affect the business of Yahoo - Microsoft may be trivial, but it is my money and I have no interest in supporting Microsoft and haven't since experiencing it's tactics from year one. And I do mean year one, having been in the computer industry since coal fired Cobol computers. I already have a G mail account so it will just take a few clicks to make it so.
Posted at 5:10PM on Feb 11th 2008 by wildflecken
40. Brilliant and spot on. Yahoo should sell to realize Yahoo's full potential, which is languishing for reasons nobody really understands. Sure there are risks but they are likely greater if Yahoo keeps on this same track, slowly withering away in terms of morale, search market, and most importantly stock value.
Now it's going hostile and Yahoo will waste time and innovation fighting where they should be innovating...together...with Microsoft.
Posted at 8:45PM on Feb 11th 2008 by Joe Hunkins
21. First of all, I have no idea why Google stock is worth so much. When you compare google to other companies in terms of revenue, or compare other companies with a similar stock price in terms of revenue they make, then you should wonder too.
Having said that, I don't quite understand why it should be such a good idea technology wise. You mention why they should in the large scheme of things, but think about it. . .
Microsoft just spent a lot of money overhauling their search service to meld with Vista & Office Suite and called it "live". Why go through all of that, THEN buy yahoo who has similar web technologies?
Please write a follow-up story Cuban.
Posted at 10:00PM on Feb 4th 2008 by Brant Tedeschi