Archive for April, 2008

I’m going to officially be the first to suggest this:
 
MSFT should walk away from YHOO… and come back in a few months with a halved offer but all in stock… and tell the world that Bill Gates is going to run the division.
 
Bill is the only guy at Microsoft that would have the juice to make sure the YHOO division (services, content, advertising) wouldn’t get crushed by Redmond (Windows, Office, and servers) — and actually gets the attention it would need to combat GOOG.
 
Plus, Bill has kinda done this before — only Bill had the juice to turn the disconnected battleship that was Microsoft in 1999 and force Internet religion into every single, tiny crack that is Microsoft today (even trashing a $1.5 billion investment into a proprietary MSN network along the way).
 
Think in terms of a second act that may be even larger than the one Steve Jobs is pulling off.
 
Plus, I hear Bill will have some extra time on his hands come June. <smile>
I may be missing something… but I just don’t get why everyone says Microsoft has to raise its offer to buy Yahoo.
 
YHOO has aggressively tried to find alternative buyers and got exactly 0 bidders.
 
I’ll take it one step farther:  It would be irresponsible to MSFT shareholders for MSFT to not walk right now… not if doing so could eventually mean a substantially lower purchase price (which was pretty damn high to start with… have to wonder what MSFT was even thinking).
 
I get there are morale issues any way you turn.  Doesn’t matter, those are short-term if the situation is handled correctly.
 
To wit, here’s what should happen now:
 
*  MSFT walks (bid too high in the first place)
*  YHOO tumbles to teens
*  YHOO drifts lower, possibly into high single digits
*  MSFT re-bids at mid-to-high teens in an all-stock deal (why this originally wasn’t an all-stock deal baffles me)
*  With some of the $15-$20+ billion it is saving, it creates killer-can’t-turn-down stock grants for key YHOO employees (whose options haven’t appreciated in years)
*  MSFT gives YHOO the reins and a lot of juice and tells them to go (try to) kill GOOG
*  MSFT gets what it wants:  YHOO properties, somebody much better managing their online activities, and happy & incented YHOO employees
*  MSFT stock (which YHOO shareholders now hold) goes up and makes MSFT and YHOO shareholders happy
 
Figuring this all out doesn’t seem so difficult to me. <smile>
About a month ago I blogged about YHOO’s full court shot with 0:01 left on the clock (otherwise known as Q1 earnings report).
 
They beat their reduced guidance… but needed to smash their numbers. 
 
They didn’t.
 
As such, MSFT should dramatically lower its bid and use some of the tens of billions it will save in creating crazy-great retention bonuses for just the killer employees. 
 
That means MSFT gets the properties it wants — and the employees — at a greatly reduced price — and everyone concerned is happy. 
 
And, yes, even shareholders should be somewhat happy… YHOO would be trading in the low teens — maybe even high single digits — without MSFT.
We’ve discussed in the past that I don’t think GOOG should split its stock until it hits $1,000.  A bunch of good PR reasons.
 
Turns out there is an unintended consequence of toting around a huge share price:  The perception of what’s an "earnings crush!" — or, for that matter, a "huge earnings miss!"
 
For example, everyone is saying that Google "smashed" their earnings numbers:  Expected was $4.52 (and actually the whisper number was 4 cents lower)… but GOOG delivered $4.84.
 
If GOOG’s share price was "normal"… let’s say $45 rather than $450 (about what it closed at yesterday)… GOOG would have beat by 3 cents (48 cents vs. 45 cents).
 
Certainly a beat in the face of an expected miss is terrific.  But, I wonder how many people would have called that a crush?
 
Note that this has worked against GOOG, too.  They "missed" earnings by a few cents a few quarters ago, which, if divided by 10, wouldn’t have even been rounding error.  In other words, they would have made their number (and possibly avoided ensuing share price carnage).
No doubt, GOOG has had a black cloud hanging over its head for months now.
 
But, GOOG just reported Q1 earnings… and the following CNNMoney headline says it all:  Google Defies The Skeptics.
 
Well, and this one from the Wall Street Journal:  Google’s Profit Surges Easing Growth Fears.
 
What’s the real message?  Whether the slowdown is real or perceived, online advertising continues to kick butt.
For those keeping track — despite vowing to avoid me the entire day (and she did) — I got my wife with an April Fools joke the other day… again.
 
19 years and counting.
 
<smile>