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Microsoft gives up on its bid for Yahoo!
May 3, 2008 5:56 PM   Subscribe

There will be no MicroHoo!, for MS has pulled its offer for Yahoo! According to a source close to Microsoft, Yahoo founder and CEO Jerry Yang had "unrealistic expectations."
posted by porn in the woods (53 comments total) 1 user marked this as a favorite

 
Yahoo!
posted by mattoxic at 6:03 PM on May 3, 2008


That would've been so great for Google if it had gone through.
posted by mullingitover at 6:09 PM on May 3, 2008 [1 favorite]


According to a source close to Microsoft, Yahoo founder and CEO Jerry Yang had "unrealistic expectations."

It's all very strange to me that I used to send and recieve packets from Jerry Yang's computer when it was still just a little hand-sorted list of links served from his closet.

I think I'm going to go... sit down for a little bit and have a cup of tea and think things over for a little bit.
posted by loquacious at 6:12 PM on May 3, 2008 [4 favorites]


Microsoft should buy Adobe instead. That makes a lot more sense than the ridiculous rumor that Apple might buy Adobe.
posted by meta_eli at 6:13 PM on May 3, 2008 [1 favorite]


That's a relief. I can't think of a more bizarre conflict in corporate cultures than Microsoft's and Yahoo's.

Here's some backgrounding by Marc Andreesen (who knows a thing or two about how to sell the farm) on Yahoo's shareholder structure that more or less facilitated Microsoft's plans for a hostile takeover.
posted by ardgedee at 6:16 PM on May 3, 2008 [1 favorite]


Why did they even want it in the first place? I guess it still has brand-name recognition, but so does AOL, and that's equally worthless. All it is now is a tacky, useless portal with a crappy search engine and an abysmal free mail service. It hasn't really been relevant since the previous century. Unless someone implements a search engine where your results are instantly delivered by a singing prostitute who also brings you a pizza, no one's going to beat Google, especially not yester-decade's contenders. Hey, is AltaVista still around? How about HotBot? Why not buy them too?
posted by DecemberBoy at 6:19 PM on May 3, 2008 [2 favorites]


Flickr is nice. And Pipes shows that they still have some engineering talent. I wouldn't count Yahoo out just yet.
posted by meta_eli at 6:24 PM on May 3, 2008 [1 favorite]


Have you used Yahoo!'s search tool lately, DecemberBoy? There's a reason why MeFi uses it.

Google has been sort of scrambling to catch up, there, and diversifying their offerings and userbase away from being a search tool and much more than a mere portal.

Granted, I still go to Google for first searches, because, well, I'm lazy and a creature of habit and I haven't changed my links? Because it looks cleaner, and it doesn't have that hideously bloated front page? *shrug*
posted by loquacious at 6:25 PM on May 3, 2008


> Why did they even want it in the first place?

My guess was that Bear Stearns was jockeying for some big commission dollars as a last-ditch effort to dig itself out of a hole. This may have no relation to reality, since I have no first-hand knowledge, connections, understanding of procedure, etc.

I want to see some of the Wall Street Mefites chime in with more constructive comments than I can make.
posted by ardgedee at 6:27 PM on May 3, 2008


I'm pretty sure Metafilter doesn't use Yahoo anymore, loquacious.
posted by puke & cry at 6:35 PM on May 3, 2008


Why did they even want it in the first place?

There are a few good reasons. First off, Yahoo is great web real estate. They may not be great at monetizing it but they have the number 2 most trafficed website on the web. Plus the top sports site, one of the top email services, one of the top chat programs; pretty much you name the category and they have a top site catering to it.

Second, Microsoft would get a group of web workers who understand what the web wants. Microsoft has the number 1 browser with their live services as the default settings and they still can't get any traction on the web. It's embarrassing for them. THey have to answer to their shareholders why Google can make as much money as they do using spaces that Microsoft competes in. Yahoo would give Microsoft some folks who have a track record of staying relevant on the web. You may not use Yahoo's services, but a lot of people do.

And third, they need a new source of cash. Microsoft has something like a third of their revenue coming from Office. This costs $300 a copy and requires the larger companies who use it to hire people specifically for making sure it is updated and installed and maintained. So it's expensive and hard. They are about to start competing with companies that offer an equivalent service for free or for around $50 bucks a year. So long run, they stand to lose a lot of revenue. They need some innovative web talent and space to generate Google style profits to replace that money. And Yahoo has that. The only thing Yahoo is missing is an efficient way to monetize those attributes, something that Microsoft just happens to own, Adcenter.

There are a lot more reasons, but those pride, assets, and large amounts of potential profits stand out as the top ones.
posted by aburd at 6:40 PM on May 3, 2008 [7 favorites]


It's embarrassing for them.

I concur. I thought the merger announcement itself was embarrassing -- almost like Microsoft had admitted they can't compete on their own. And now that the merger has failed? Ouch.

I'm not saying MSFT is about to go bankrupt or anything, or that they've given up. But, man, have they fallen far in a decade.
posted by sdodd at 6:48 PM on May 3, 2008 [1 favorite]


Best thing to come of this will be Ballmer's imminent departure from MS. The Zune, Vista, and now this are the perfect trifecta of Fail.
posted by mkultra at 6:49 PM on May 3, 2008 [5 favorites]


Good. I use a several MS and several Yahoo products and services and if the merger had been successful it would've just been too much, one company having so many gateways to me is unsettling. I would've had to find different email and IM services and had to endure the switching pain.
posted by aerotive at 6:53 PM on May 3, 2008


DecemberBoy: Why did they even want it in the first place? I guess it still has brand-name recognition, but so does AOL, and that's equally worthless. All it is now is a tacky, useless portal with a crappy search engine and an abysmal free mail service. It hasn't really been relevant since the previous century.

Yeah, why would someone want the most popular web property in the world? That's crazy! It's not like Microsoft built this giant ad delivery platform and desperately needs places to serve it or anything.
posted by mkultra at 6:54 PM on May 3, 2008


I feel bad for Yahoo. They've got some great engineers doing some great work- their YUI javascript library is seriously high quality (and has led the field of Javascript toolkits in several areas), their engineers have been at the forefront of performance research, and they've been much more heavily involved than Google in advocating for the advance of web standards (even though I don't agree with the incrementalism they advocate for HTML 5 and Ecmascript 4). Flickr and del.icio.us are both much higher quality than Google's competing offerings, and their search is just as good as Google's nowadays IMHO, probably in part because they don't have as many people obsessively trying to game their algorithm. Google is a great company, but their success is now based on their brand and inertia- when searches have a long tail distribution, there are strong network effect incentives for advertisers and searchers to use a single common market, for both to maximize the chance of making the obscure connections each is looking for- not much technical superiority. Google's extreme popularity, even among the well-informed geek set, spooks me. I wish they had more competition.
posted by gsteff at 6:55 PM on May 3, 2008 [2 favorites]


Yahoo has a search?
posted by Artw at 6:56 PM on May 3, 2008


Wow, if I owned YHOO I might be more than a little pissed.

However, I presently own SQUAT, so my opinion ain't worth much.
posted by mr_crash_davis at 6:56 PM on May 3, 2008 [2 favorites]


"Unreasonable expections." Heh.

Yang and probably others knew exactly what to expect: Microsoft would destroy the company as it's now known. They'd mess with the back-end technology, swapping in as much .NET as possible, they'd merge some stuff with Windows Live and vice versa, they'd kill anything that's a threat to their desktop hold or they'd limit its prime interoperability to Microsoft products. Lots of features would become dependent on IE and Silverlight.

In short, Yahoo's entire mission would shift from being a portal and online services company to being another vehicle for maintaining Microsoft's dominance and, where possible, helping them play catch up.

This is not to say they would succeed. In fact, I think it's even money that they'd create a train wreck. Or at least a steadily alienating train of mediocrity.

Why did they even want it in the first place? I guess it still has brand-name recognition, but so does AOL, and that's equally worthless. All it is now is a tacky, useless portal with a crappy search engine and an abysmal free mail service.

I also think nearly everything Yahoo does is done better by someone else. But they are far from being chopped liver. I think Yahoo in general is still actually the #1 destination on the web despite the huge surge in popularity in social networking sites. Flickr and Yahoo Groups are extremely popular as well as being pretty useful -- and those sites in particular are pretty sticky, once those tools are used as intended, migrating away is a pain. And there's a lot more to Yahoo than those two things. And they're not standing still.

Honestly, I think there's a decent case to be made that Yahoo has better long term growth prospects than Microsoft does. If I held a good chunk of their stock and wanted out today or soon, sure I'd want the deal to go through. But over 20 years? There's no guarantees, but Windows as a platform is stagnating, while the web as a platform is still new and growing, and Yahoo's the gorilla there.

Leadership expectations at Yahoo may not be as unrealistic as Microsoft would like to suggest. If they were, MS wouldn't care anywhere near as much in the first place.
posted by weston at 6:58 PM on May 3, 2008 [4 favorites]


Microsoft should buy Starbucks, that way the companies that I've worked for that MeFi has a hate-on for could be unified in an unholy alliance of doom.
posted by Artw at 7:00 PM on May 3, 2008 [4 favorites]


Microsoft should buy Adobe instead. That makes a lot more sense than the ridiculous rumor that Apple might buy Adobe.

Ridiculous how? Like "how on earth would they," or "why on earth would they"? Thinking about the traditional, hardcore Apple user base (designers et al), I can't imagine a better thing for Apple to own than Adobe. "How"? Well, that's another story, although Apple does seem to have quite a bit more cash than it used to...
posted by bitter-girl.com at 7:00 PM on May 3, 2008


It was unrealistic of Jerry Yang to expect Microsoft not to turn Yahoo into crap.
posted by Poolio at 7:02 PM on May 3, 2008


The Zune, Vista, and now this are the perfect trifecta of Fail.

Hey now, don't fuck with the Zune!
posted by dobbs at 7:03 PM on May 3, 2008


Ah good; that means I can post to Flickr without buying a Windows machine.
posted by acb at 7:13 PM on May 3, 2008


Yippee-Kai-Yay, Microsofter...
posted by wendell at 7:22 PM on May 3, 2008 [1 favorite]


However, I presently own SQUAT, so my opinion ain't worth much.

Well, Microsoft could fall back on a SQUAT buyout.
posted by storybored at 7:30 PM on May 3, 2008


in·ter·net  n. 1.  A steadily alienating train of mediocrity.
posted by blacklite at 7:39 PM on May 3, 2008 [4 favorites]


SQUAT is up 100% in the last two weeks.

But then, 200% of SQUAT is SQUAT.
posted by wendell at 7:57 PM on May 3, 2008 [1 favorite]


Flickr and del.icio.us are both much higher quality than Google's competing offerings,

True, but they were both acquisitions, not a product of great Yahoo engineering.

and their search is just as good as Google's nowadays IMHO

Maybe, maybe not.
posted by CheeseDigestsAll at 8:15 PM on May 3, 2008


There's no particular reason to think that today's communication from Microsoft is the end of a Yahoo acquisition.
posted by Nelson at 8:27 PM on May 3, 2008


Truth be told, I would use Yahoo! way more if a) the company and its email client was not branded *Yahoo* and b) if it didn't use those stupid happy faces. Yahoo! Mail ads are also way too intrusive.
posted by KokuRyu at 9:28 PM on May 3, 2008


Correct, Nelson. Microsoft is looking at overseas markets, and Yahoo is their main competitor in China. Google has not made big inroads in that locale as yet and it is where the growth is, at the moment.

Additionally, I wouldn't say that Microsoft is inherently less clueful about the web, especially at a one-by-one level, than Yahoo.

But the legacy of play-to-kill and desktop dominance means that senior managers don't have a web and post-web mindset and that makes for goal distraction internally, IMHO. Combine that with the traditional disregard for human factors in interface and architecture design and you have a company that involuntarily creates captive downstream clients, companies and individuals that HATE the fact they have to depend on Redmond.

And that means no goodwill, and in the reputation economy, that has a cost.
posted by mwhybark at 9:32 PM on May 3, 2008


According to a source close to Microsoft, Yahoo founder and CEO Jerry Yang had "unrealistic expectations."

And according to a source close to Yahoo, Microsoft CEO Steve Ballmer had "unrealistic expectations."
posted by Project F at 9:35 PM on May 3, 2008 [1 favorite]


There's no particular reason to think that today's communication from Microsoft is the end of a Yahoo acquisition.

If Microsoft goes fully hostile on Yahoo.

I wouldn't be surprised to see them try it. I believe everything I said about Yahoo being a better long term prospect, and I think that Yang and other leadership probably believe it too. The question is how many shareholders either (a) don't understand the business that way (or that well) or (b) don't care because they're inside their exit window.
posted by weston at 9:45 PM on May 3, 2008


Ballmer doesn't walk away from anything.

He stomps.
posted by mazola at 9:53 PM on May 3, 2008 [3 favorites]


Best thing to come of this will be Ballmer's imminent departure from MS

Ballmer has been a total failure at running the company. It's strange that he's still there.
posted by bhnyc at 11:22 PM on May 3, 2008


So I can see why the employees would care but the shareholders? I don't understand why anyone except for some diehards would care about a "long term prospect" when they can get paid today. That sort of suggests there no other long term prospects available for them to buy with more money.

Then again I don't understand the whole idea of resisting takeovers. I mean I can see why employees or management might have a problem but if you want to buy any stock I own at a significant premium over market give me a call. I mean I guess I choose to buy a stock because I believe a company can outperform the market's prediction of their success but if you want to buy me out right now I'm sure I can find someone else to believe in.
posted by Wood at 11:22 PM on May 3, 2008


Three years from now, when News Corp is done dismantling Yahoo, scattering their talent to the four winds, and handing Google nearly 100% of the search and Internet advertising market, a lot of folks adamantly against the MSFT-YHOO hookup will be wringing their hands.
posted by dw at 11:32 PM on May 3, 2008 [1 favorite]


It's strange that he's still there.

As much as I think Ballmer is a buffoon who the hell else is going to run the company? There are precious few software execs these days that know about running a company that big. Schmidt has the best job in the world, so he's not going anywhere - and before Google I'd argue that he was doing merely OK as an executive. Nobody brags much about Novell. Is McNealy going to come back to run Microsoft? heh. Even Ray Ozzie who is a pretty smart guy is frankly not doing that great a job of forming MSFT's strategy. Live Mesh? Whatever. An executive from Oracle or Adobe? Unlikely. MSFT is becoming like GE, a conglomerate of businesses that have less and less in common as time goes on. Except that it lacks one thing that GE has - a powerful executive development program. MSFT leaders spin out to run smaller companies but to my knowledge you don't see MSFT exec being recruited to run other large software companies. Even Oracle has produced more leaders under the reign of Crazy Larry. Microsoft needs to get rid of the infighting group presidents and start a really strong program to build the next generation of company leaders. Because so far I don't see them.
posted by GuyZero at 11:35 PM on May 3, 2008 [3 favorites]


Additionally, I wouldn't say that Microsoft is inherently less clueful about the web, especially at a one-by-one level, than Yahoo.

Really? With the exception of Mesh, they really don't offer anything that Yahoo hasn't done better to begin with -- or acquired a better version. And worse still, MSFT is throwing themselves hard into Silverlight, which really seems pointless and too much about them chasing another buzzword (RIA).

That said, Mesh is really great stuff, if they can get it all to work. They're embracing and extending open standards with it -- here's hoping they don't extinguish next.

And hey, Mesh gets the Dvorak Seal Of Bile-Spitting Disapproval, so it must be good.
posted by dw at 11:40 PM on May 3, 2008


Except that it lacks one thing that GE has - a powerful executive development program.

The thing is, there's a huge university about 30 minutes away from MSFT by car or bus. That university has been producing graduates that work for MSFT for years. They have a very good comp sci program, a good engineering management program, and a business school that's trying to remake itself into a destination B-School for the West. Bill's mom and Paul's dad worked there; Bill's dad graduated from there.

But until the last couple of years, MSFT virtually ignored the UW. Now, it's trying its best to get a beachhead on campus, looking for ways it can not only sell software on campus but also utilize what UW has to create the sort of leadership they need in-house.

Even then, the strategy isn't very evident, and honestly it's a hard sell on a campus where office doors of the computing department sport Tux and Apple stickers, and people choose open source because it's open source and it's free.
posted by dw at 11:55 PM on May 3, 2008


I never really saw the sense in this merger.

It seems to me Microsoft desperately needs to concentrate on its core products Windows and Office, especially given the slow uptake of Vista. I don't see why Microsoft shareholders should want the company to go off on an another wacky internet adventure.

The companies' technologies seem too incompatible for there to be much chance of cost saving. Also, Microsoft wouldn't want Yahoo to keep using Linux instead of Windows: very bad PR if your web arm won't use your own operating system. But that could just lead to Hotmail squared: you could end up with thousands of developers wasting time in the pointless busywork of shifting platforms, while competitors like Google are kicking your ass improving their products.
posted by TheophileEscargot at 1:29 AM on May 4, 2008 [1 favorite]


Why do people keep referring to Yahoo! and Google as primarily technology companies? They've become large advertising networks (it's 99% of Google's revenue, 90% of Yahoo's) that happen to leverage computer technology. Microsoft wants a piece of the cake because that's where the money is, as MS still mostly remains a technology company, making and selling sofware and hardware. The whole battle is just about who's going to sell more ad space to shampoo makers and ambulance chasers. Of the five reasons given by Ballmer at the end of his letter, 4 are directly related to advertising.
posted by elgilito at 2:00 AM on May 4, 2008 [1 favorite]


As much as I think Ballmer is a buffoon who the hell else is going to run the company?

I'll do it. Just give me Ballmer's job (and his salary), and if in one year, I haven't completely revitalized the company, I'll just step down.

Then I'll retire to Tahiti.
posted by Kirth Gerson at 5:09 AM on May 4, 2008 [2 favorites]


If Microsoft does a hostile takeover of Yahoo, they'll get only a smoking ruin, because all the really bright people will flee. They can't do a hostile takeover, because the knowledge will just leave. Even a "friendly" takeover would be pretty damn unlikely to work. It's not like the employees are in chains, and it's ONLY the employees that matter.

Marriages of tech companies often fail, because the management of the buying company will rarely realize when the bought company is doing things better. I've been through the process from both sides, and it can be very destructive to talent in the subsidiary.
posted by Malor at 8:38 AM on May 4, 2008 [3 favorites]


As much as I think Ballmer is a buffoon who the hell else is going to run the company?

STEVE JOBS #1 MS EXECUTRON!!1!!
posted by furtive at 8:39 AM on May 4, 2008


I'll do it. Just give me Ballmer's job

I'm sure you'd be better than Ballmer. The mistakes they made with Vista were so basic that I think anyone outside of MS with software experience could have done better.

this guy has some good ideas
posted by bhnyc at 8:58 AM on May 4, 2008




It seems to me Microsoft desperately needs to concentrate on its core products Windows and Office, especially given the slow uptake of Vista. I don't see why Microsoft shareholders should want the company to go off on an another wacky internet adventure.

Office's competition is coming from wacky internet adventures like Google Apps. This is a space where Yahoo is a potential credible player, and Microsoft simply is not.

Why do people keep referring to Yahoo! and Google as primarily technology companies? They've become large advertising networks (it's 99% of Google's revenue, 90% of Yahoo's) that happen to leverage computer technology.

Because it takes a lot of technology (and advances in technology and infrastructure) to become a large advertising network. The network is the technology. Google provides functionality on that network, like Apps, so that you will see Google ads (or pay Google not to see them.)
posted by me & my monkey at 10:18 AM on May 4, 2008


Three years from now, when News Corp is done dismantling Yahoo, scattering their talent to the four winds, and handing Google nearly 100% of the search and Internet advertising market, a lot of folks adamantly against the MSFT-YHOO hookup will be wringing their hands.

If it turns out that Yahoo's last useful act is to take a bullet rather than hand over all its real estate to Microsoft, I'd consider that a plus for the industry (I'm not a shareholder, tho', and definitely an MS hater).

That said, it is hardly a forgone conclusion that any other purchaser would mess up the company as badly as Microsoft is likely to. Someone like News Corp wouldn't have the motivation (nay, out-and-out compulsion) MS would to mess with Yahoo's technical choices. Nor would the name of the new owner have the same psychological effect on engineering staff.


If Microsoft does a hostile takeover of Yahoo, they'll get only a smoking ruin, because all the really bright people will flee. They can't do a hostile takeover, because the knowledge will just leave.link I posted earlier is the idea that this bit of common wisdom for the tech industry is beginning to be challenged.

It's also possible that Microsoft may not care if they destroy Yahoo by buying it. Even if they accomplish only obliterating Yahoo, if the refugee eyeballs don't all go to one other spot, then MSN has still moved itself higher on the ladder. If they keep some fraction of Yahoo's traffic, all the better. I think this is also unlikely -- I think the refugees are more likely than not to go to Google or Facebook or something else -- but MS may see things differently or be willing to gamble.

And finally, there are of course the people who think much as dw has said:

So I can see why the employees would care but the shareholders? I don't understand why anyone except for some diehards would care about a "long term prospect" when they can get paid today. That sort of suggests there no other long term prospects available for them to buy with more money.

This is one line of thinking. It will be interesting to see how many of the shareholders follow it.

Another line of thinking is that Yahoo is undervalued right now, that they have the potential to be something quite a bit more like what Google is right now, such that even a 60% premium doesn't reflect that potential. This is pretty much the case Yahoo must be making to large investors now if they want to be able to stave off a potential hostile takeover, and there are some problems with this proposition, but I think that if the board's already been talked out of the offer, someone's been able to make a good case, one that may well convince the shareholders themselves who aren't simply arbitrageurs or otherwise quite ready for an exit.
posted by weston at 11:27 AM on May 4, 2008


Blargh. Part of that comment seems to have been munged. Regarding the idea that hostile takeovers are generally considered a bad idea in tech, the article I linked above (If Microsoft goes fully hostile on Yahoo!) suggests that this common wisdom is being challenged. Though I suspect the common wisdom is there for good solid reasons, this in itself is quite possibly more interesting than any of the specific drama surrounding MS/Yahoo.
posted by weston at 11:32 AM on May 4, 2008


That said, it is hardly a forgone conclusion that any other purchaser would mess up the company as badly as Microsoft is likely to.

I've felt the MSFT-YHOO deal could be beneficial for both sides -- MSFT gets YHOO's advertising network and well-integrated web apps, while YHOO folks would be in a position to drive MSFT's schizo online strategy. There's always the potential that MSFT could screw it up by, well, being MSFT, but given that there was zero indication they were going to shutter the Sunnyvale offices I would think that MSFT was going to be pretty hands off. And I think they know deep down what I know -- YHOO's web people have a far better grasp of how the web works than the folks in Redmond. MSFT is incredibly woeful in the UI department on the web side, and they know it.

And the only way MSFT could screw up YHOO is if they forced them to "integrate" into their systems. The problem is that there's no way anything YHOO has could be integrated without years and years of Vista-level deathmarch coding work, the sort that would kill MSFT. OTOH, MSFT integrating into YHOO's system, that would take less time and reap short and long term benefits.

Someone like News Corp wouldn't have the motivation (nay, out-and-out compulsion) MS would to mess with Yahoo's technical choices.

News Corp, though, has little technical expertise, an Internet strategy that makes MSFT's look coherent, and really only one decent plan -- position itself to usurp Google when they finally stumble. I can see News Corp keeping Yahoo's fantasy sports engine and carving everything else off.

Nor would the name of the new owner have the same psychological effect on engineering staff.

News Corp = Murdoch. Tell me, in an area as liberal as Silicon Valley, that there wouldn't be fear and trepidation over working for Fox.
posted by dw at 3:49 PM on May 4, 2008


Well, as someone who used to work for a fabulous company that was slurped up and destroyed by Yahoo...I'd be more than happy to take the premium for my shares, and buy some stocks actually worth a damn.

Here's the deal with Yahoo stocks; they don't pay a dividend. You buy Yahoo stock with the anticipation that the stock will rise again to the bubble years and you'll make your capital gains by selling the stock for more than you paid for it. People who vested in stock options will make money at almost any price, but were locked out from selling during a lot of the really insane pricing. A lot of those option holders have kept the shares in their portfolio, because, depending on your price point, you were always going to make money when you sold them, and by holding them, you had solid assets when seeking things like mortgages.

That said: There are lots...LOTS of people out there who want nothing more than to see Yahoo have done to them what Yahoo did to a lot of other companies. Buy and destroy.

If MS wants to bury Yahoo, after the way Yahoo treated thousands and thousands and thousands of employees at companies it bought where they subsequently laid everyone off...MS can buy my shares at the premium they offered.

Not that I hold a grudge or anything.
posted by dejah420 at 5:59 PM on May 4, 2008


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