Sorry for the multiple posts today but I couldn't help but make a brief comment on this.  According to Search Engine Journal, Yahoo says...

we will sell the entire Company to Microsoft for $33 per share or more if Microsoft will negotiate a transaction that delivers certainty of value and certainty of closing.

First, let me say I doubt this is what they told Microsoft originally because Microsoft originally offered $31 a share and I can't see a deal this big collapsing for $2 a share.

That said, $31 was astronomical AT THE TIME!  Before Yahoo lost the great majority of their talent, before hundreds of executives jumped ship, before Yahoo's management instituted several technological and business related poison pills to prevent said merger.  NOW they want $33 a share?!?!?

Its a more than 48% premium on a stock price that's still being inflated by the possibility of a  merger with Microsoft.  It's a more than 73% premium on Yahoo's stock price right before the merger was offered. 

Get Real!

(For the record, a lot of sources apparently reported this before SEJ and usually I try to link to the first source.  But SEJ put the meat of the letter in their headline which is what caught my eye on Techmeme and which is why I linked to them)

Pardon my double posting today but a series of posts really got to me and I felt the need to speak  up.  This really is the very definition of a "petty annoyance post" on my part so I apologize in advance (especially since my last post fell into vaguely the same category)

Anyway, the first quote came from Mark Evans who discusses Yahoo's current predicament...

Maybe the beginning of the end was the appointment of Terry Semel as CEO, who may go down as Yahoo’s John Sculley. Semel was intent on leveraging Yahoo’s traffic to maximize revenue. From a business perspective, it was probably the right decision but this laser-like focus on cash took away from the fact Yahoo made its mark by delivering solid services that people used and enjoyed.

There are so many things wrong with this paragraph that I barely know where to begin.  Here's a quick list though...

1. How did Yahoo! "make its mark by delivering solid services" exactly?  Yahoo! was semi successful as a portal and free e-mail provider but those services were always lackluster.  Yahoo! was never a good search engine and in fact was losing market share to Altavista before Google ever came along.  Their messaging system always sucked, their IM has always been an also ran, and so on, and so on.  Yahoo! hasn't been a successful company since the dotcom boom and is still alive largely based on a colorful brand and an early entry into the portal market
2. How did Semel get the blame for this?  I didn't personally agree with the direction he took the company but the man was brought on after the ship was already sinking.  He was fired because he couldn't get it back above water but his failure was purely one of not being able to solve the problems.  He didn't create them. 
3. This is off topic but people who throw John Sculley's name around either need to study Apple history or shut up.  Sculley had a run at Apple that was very successful overall and its Sculley that was responsible for the Mac's initial success (Jobs refused to put a hard disk in the Mac so it was largely a failure until he was ousted).  Sculley had faults to be sure but he wasn't a failure by a long shot and he's responsible for more of the current Apple mythos than he gets credit for.

The rest of the post is just about as bad.  I've been a reader of Mark Evans blog for a while and I don't mean to attack...well no, I do in fact mean to attack him here.  This post was just stupid and in this case he deserves to be attacked. If you want to discuss the history of the technology industry than you should have some idea what you are talking about. 

Anyway, Mr. Evans points to a post that amazingly annoyed me even more.  In it blogger Steve Hodson gives this advice that he believes will "save" Yahoo!

1. Kick Yang the hell out of there ASAP – like yesterday

2. Take the penalty and ditch the upper management as quickly as possible.

3. Tell Carl Icahn to go sit in the corner and STFU

4. Pay whatever it cost to buy FriendFeed ASAP

5. Put the FriendFeed boys in charge of Yahoo ASAP

You've got to be bloody kidding me.  I swear, I had to read the comments just to make sure he he wasn't kidding.  FriendFeed?  Do you have any idea how small and insignificant FriendFeed is in comparison to the whole of Yahoo?

I mean, its a nice little service but the sheer idea that FriendFeed would make any difference at all is ludicrous. 

Forget the down right insane idea of "putting the FriendFeed boys in charge" for now (he claims he was "being facetious" in that one claim but serious in all his other ones).  FriendFeed is an 8 person company with $5 Million in VC money while Yahoo! is a 14,000 person company with $7 Billion in Revenue per year.  Saying FriendFeed would make a bit of difference is like proposing a guy with a water bucket can purify the Pacific Ocean. 

I mean honestly, FriendFeed was launched less than 5 months ago and this guy just seriously suggested they have the proven leadership to not only run Yahoo! but save it from years of downward spiraling.

Geez...

I'm sorry.  This post is harsh and I know its harsh but I have to admit I don't feel the least little bit bad about it.  Really folks, how can anyone take this type of thing seriously?  It blows my mind.  If the above is considered serious discussion than what exactly is considered idiotic discussion?

Addendum: On the Semel point I offer this...

Again, hardly a great run but I wouldn't call him a failure either.

This kind of says it all...

It's hard for me to put a lot into this post given the extensive coverage the topic has already gotten.  I, like most, think Microsoft dodged a bullet whether they realize it or not.  Yahoo on the other hand was in a bad place before Microsoft made the offer and has now lost a lot of time, money and valuable employees as a result of the offer.  They're obviously in some trouble.

A lot points to this not being over.  AOL might ride in and try the merger talks again, Google might cut Yahoo a sweet heart deal and Jerry Yang might get fired encouraging Microsoft to take another shot.  For now, no one knows.

But all that has been said to death on just about every other blog so I'll digress.  There are two unique things I think I can add to this.  Two items I haven't seen addressed elsewhere.  Those are...

1. Microsoft needs to target Yahoo now:  I don't think Yahoo was worth much to Microsoft but it does have value.  In particular, its valuable to any company that wants to beat Microsoft over the head with it.  A permanent Ad deal with Google or a merger with AOL could both cut into Microsoft's already miniscule bottom lines in both search and ad sales. 

This is strategy 101: first try to get the weapon.  If you can't get the weapon next try to deprive your enemy of it. 

Microsoft now has $44 billions burning a hole in its pocket and I think they should consider using a lot of it to tear Yahoo apart.  Stealing as many great employees and valuable customers as possible gives Microsoft part of what they wanted at a fraction of the cost. 

2.  Google might not be a Winner here: Many have pegged Google as a winner but I'm not so sure.  We in the United States have one of the most "Open Market" oriented Presidents in recent history right now.  That is a fact that is going to change in a few short months (no matter who wins the next election). 

Google is already skating really close to the anti-trust line and having MicroHoo to refute that accusation might have worked in their advantage when the time comes.  An ad deal with Yahoo on the other hand has the opposite effect.

That's it for me on this.  I'm posting this at 11:15pm so Black Monday is just around the corner.  I suspect things will be a lot clearer once we see how that pans out. 

So it appears things have gotten even more complicated for the Microsoft/Yahoo merger.  From Techcrunch...

Things are moving fast in the Yahoo-Microsoft drama. All the different forces are aligning for an endgame. The latest twist: The WSJ is reporting that Yahoo is close to signing a deal to combine with AOL.

This at the same time that Yahoo is doing a limited test to place Google ads in its search results. Meanwhile, News Corp, which Yahoo once hoped would be its white knight, is said to be turning on Yahoo and talking to Microsoft about joining its bid. Obviously a lot of balls are up in the air right now, and anything is possible.

Here's the thing, I've spent a good amount of my life studying the history of the tech industry.  To the best of my recollection two failing companies have never combined to make a more successful company.  It just doesn't happen.

Mergers can be good long term investments but their short term affect on a company is to distract. Logistical problems cause the companies to become inwardly focused which by definition causes them to fall behind their competitors (who in theory are outwardly focused like every good business should be)

So when two companies that are in decline and therefore already behind their competitors attempt to merge the end result is to bring the combined company even further behind.  A recipe for disaster if ever there was one. 

Beyond that, a company in decline already has a management problem.  I mean, I hate to generalize to that extent but its true.  If your company is failing it isn't being managed well.  Cause = Result. 

This again causes problems since combining two companies is pretty much the ultimate management task.  It takes the toughest management task in existence, building a company, and combines it with the task of trying to stabilize not one but two existing companies.  Even good mergers are a nightmare and require excellent managers. 

In the end, mergers like this really just don't work.

Lucky companies manage to survive but end up shrinking to equal the size of one of the pre-merger companies (HP/Compaq).  This essentially erases one company's value entirely.  Unlucky companies just end up dying. 

I'll be the first to admit the Microsoft offer isn't ideal but at least it gives Yahoo a chance at thriving (however unlikely).  That said, this might be good news for Microsoft.  It means a year or so from now they can get Yahoo AND AOL for the same price they are willing to pay for Yahoo now!

Mathew Ingram writes (in response to PBS-Cringe's post)...

Robert X. Cringely, the pseudonymous tech guru who writes a column for PBS, gives us the benefit of his decades of wisdom on the whole Microsoft and Yahoo front in a post entitled The Men Behind The Curtain. Not only does he give us the benefit of his wisdom, in fact, but he spends the first part of the column telling us how he’s going to give us the benefit of his wisdom, and how we should all be damn glad about it.

...

But the big revelation… wait for it… is that Yahoo has been scared ever since it bought Mark Cuban’s Broadcast.com for $5.7-billion. So first of all, we’re supposed to believe that a deal the company did almost 10 years ago has kept it from achieving greatness, and second of all we’re supposed to be grateful to Bob for having the wisdom and the insight that it takes to deliver that kind of fascinating tidbit.

I disagree with PBS-Cringe (aka Robert X. Cringely aka Mark Stephens) quite a bit but I think the beauty of his take is his past popularity and how his perceptions (and obviously his contact list) are affected by that.  He may not be right but he represents what a certain group of people (generally the old school Valley types) think.  That's where the value in his piece is. 

He understands the motivation behind one unique piece on the game board even if he doesn't understand the game as a whole.

Do I think Yahoo makes decisions based on a mistake made by a management team that essentially hasn't been around since 1999 (according to the 1999 and 2007 proxy statements)?  No, I don't.  But if you look a little harder you'll see the real gem in his post. 

It shows how the people he represents are still in the 1999 mind set and how much of an influence that era still holds on them.  That, in my opinion, is valuable insight.

On that note, I'm outta here.  I'll be gone on vacation and banned from all things computer for a little while.  I have set up some pre-written posts which should be appearing in my place though.  Hopefully that will tide everyone over until I can indulge my obsession by unleashing an endless stream of SimpleDb based posts on you  get back

Let me start with the quote here (courtesy of Read/Write Web)...

The OpenID Foundation is announcing this morning that Google, IBM, Microsoft, VeriSign and Yahoo! have taken seats as the organization's first corporate board members.

OpenID is a protocol for authenticating your identity through a single chosen provider instead of creating unique accounts at every website you use.

The Foundation, which was formed 18 months ago, says it "will not dictate the technical direction of OpenID; instead it will help enable and protect whatever is created by the community." That often means legal paperwork (to keep a single company from patenting important open standards, for example), and that means money is needed. Cash will also help with some much needed marketing and communications efforts.

OK...this has begun to bother me. 

This has become a trend now where companies join essentially useless organizations so they can claim to support open standards that they have no intention of actually supporting.  First there was DataPortability.org and now we have The OpenID Foundation, both organizations that have no real purpose other than to "discuss" and hence are easy for big companies to use as Public Relations tools.

These companies aren't even wiling to assign vaporware status to OpenID.  They could easily say "we plan to implement OpenID at some time in the future" only to forget about it down the line (they've all done it before).  But then they'd have to stop pushing their own proprietary solutions so they won't even do that. 

Instead this will just become an appointment for some lower level employee.  He/She will attend a pointless meeting every month and that will be the extent of it because the real goal is to quiet the community who is clamoring for change not actually make a change. 

Once the noise dies down OpenID can just fall by the wayside and be forgotten. 

The saddest part about all this is that it works.  OpenID supporters will pat themselves on the back confident that they've beaten the big companies and then go on their way.  The big companies will continue to attend meetings that go no where until OpenID has fallen so far behind proprietary technology that its pointless to discuss and then it will be forgotten. Its all just a trick and not even a clever tricky at that. 

Yet people continue to fall for it.  Please, if you support OpenID, don't stop until you get a timetable for full implementation.  Because unless you have that you really don't have anything at all. 

Addendum: In the comments I'm taken to task for saying The OpenID Foundation is "essentially useless".  Just so we're all on the same page here I'll quote from their web site on what the Foundation's purpose is...

The OpenID Foundation (OIDF) was formed in June 2007 to help promote, protect and enable the OpenID technologies and community. This entails managing intellectual property, brand marks as well as fostering viral growth and global participation in the proliferation of OpenID. The OIDF does not dictate the technical direction of OpenID; instead it will help enable and protect whatever is created by the community.

I'm not sure I meant "completely useless" when I said what I did so if that seemed implied I certainly take it back.  Both the OpenID Foundation and Dataportability.org have some uses beyond being a corporate tool.  I think my issue with them still stands though in that they are benign to me.  They don't push things forward they just sit by the sidelines (as opposed to say a standards group which is actively working on the standard).  That makes them ripe for manipulation by big companies.

Anyway, my criticism really isn't of the organizations themselves.  I'm sure each was started by well meaning peole and that well meaning people are still in each of them.  I just wonder if, by the nature of the organization, they don't invite big companies to use them in the way described above.

Heh...

As Yahoo waits in vain for other bidders or deal alternatives to emerge, the dissatisfaction of Microsoft investors with the Yahoo bid has reduced the value of Microsoft's offer to $29.50 a share.
Why?

• The bid is half-cash / half-stock,
• Microsoft's stock price has dropped about 10% since the offer was announced, and
• the share exchange ratio is fixed at 0.9509 Yahoo shares per Microsoft share

I noticed this trend the day the announcement was made and was surprised that no one was bringing it up.    Microsoft's stock went into an almost immediate drop and has not recovered since. 

The reason is that Wall Street still thinks Yahoo is a dog.  The Yahoo shares went up because the collective mentality was "no one in Yahoo's condition could be stupid enough to pass on this deal".  The traders were essentially just buying what they thought was a guaranteed short term profit. 

No one is looking to Yahoo for anything long term because the sad truth is that Yahoo is done.  They tried competing as a search company, it didn't work.  They tried being a media company, it didn't work.  They tried being a collection of "Web 2.0" companies, it didn't work.  They're out of "trys" at this point and their only hope...is Microsoft.

Every counter offer describes a way to survive independently but none offer the company a chance to prosper.  No one even gives that consideration anymore.  The truth is their chances are slim even as part of Microsoft.  But Microsoft has a mountain of cash and the will to go on which are two things that Yahoo is sorely lacking. 

So here we are a couple days later and not that much has changed.  After the initial boom of news there wasn't much left to say.  But there are a few tidbits I wanted to follow up on.

It appears that Microsoft is employing the ol' Carrot and the Stick strategy by first making their offer privately but then giving Yahoo only 2 days to respond before they made it public.  I suspect Microsoft senses resistance on their end and wanted to force a quick decision by offering a huge premium with a short time table. 

In that vein I was surprised by Steve Ballmer's tone in his e-mail to Microsoft employees.  To read the e-mail you would think the deal is already done.  Then again, given the meteoric rise of Yahoo's stock on Friday I suspect the deal might very well be done whether Yahoo management likes it or not

I did find it amusing that Microsoft's stock fell on Friday though.  Seems to suggest Wall Street still has no faith in Yahoo.

I was initially surprised that someone else would even think of making a bid for Yahoo.  But after considering it for a while there are still some interesting possibilities there.  Though I think they involve splitting the company in pieces.  Yahoo more than probably any other tech company is worth more than the sum of its parts.  I'd bet that Flickr alone might be (over)valued as high as Yahoo were they not tied to Yahoo.

On a final note, major props to Aaron Stannard of Ajax Marketing Ninja who called this a month ago.  I'm sad to admit it but my first thought when I found out about this wasn't "Wow he's smart" or "That's a really great job" it was "Please God let him be right on #5 too". 

(and off topic may I just say for the record, Please God let him be right on #5 too...because I'm at the end of my rope with it at this point)

Sorry, I'm over posting here but I just had to put this up because it was something that didn't even cross my mind.  Here's the quote which is from datacenterknowledge.com but which I got through Dare Obasanjo who pointed to Slashdot who in turn pointed to this...

The business implications of Microsoft's offer are huge. From a data center perspective, the deal would consolidate two of the largest Internet infrastructures. In a letter to Yahoo's board, Microsoft said that "eliminating redundant infrastructure and duplicative operating costs will improve the financial performance of the combined entity." A consolidation of the two companies' networks could shift a massive amount of infrastructure from open source technologies to Microsoft platforms.

I have tons of criticism for the blogosphere but this is where it really shines in that I didn't even think of this.  Microsoft is certainly going to make the eventual conversion to Windows Technology a condition of this agreement and there are undoubtedly some in Yahoo who are going to object to it.  But the people objecting are probably going to be pretty low level folks who aren't going to have a lot of say in the matter.  Assuming Microsoft already has a plan that accounts for the transition I don't think this is going to be a sticking point.  I will be curious to see how significant a change Microsoft is going to want though (is Php and MySQL on a Windows box OK or does everything have to be rewritten for .Net and SQL Server?)

With all that said lets keep this in perspective, mergers do not happen quickly and the merging of technology doesn't happen until after the merger is complete.  It may very well be years before we see the repercussions of this deal on Yahoo's current setup.