What Would a Combined Microsoft-Yahoo Look Like? 7 comments
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Microsoft’s $31 a share offer for Yahoo is made possible by Yahoo’s slumping shares (Yahoo’s stock was trading at about $31 a year ago). While Yahoo has rejected Microsoft’s entreaties in the past, with Terry Semel stepping down as chairman of the board yesterday, things might be different this time. I ran some quick, back-of-the-envelope numbers to see what a combined Microsoft-Yahoo would look like financially, and how it would compare to Google.
Click to enlarge:
* Microsoft figures are trailing four quarters and headcount is from June.
Those headcount numbers and operating expenses could be cut significantly. The real impact to Microsoft, though, is not visible in these numbers, because Yahoo represents a new growth opportunity for Microsoft in advertising revenues and online services.
During the last four quarters, Microsoft’s revenues for its online services (MSN, Windows Live, etc.) were $2.8 billion and it lost $949 million. So just combing Yahoo wih that business, you get revenues of $9.8 billion, but Microsoft would still be showing a net loss for that business of $289 million.
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This article has 7 comments:
In 2006 it cost Microsoft 18.8¢ more to generate a dollar in sales than it cost Google. Multiply that 18.8¢ times its sales revenues and you find that Microsoft had an $8.3 billion dollar problem. That's how much the company was over-spending on enterprise marketing in 2006 compared with Google. And it cost Yahoo 15.1¢ more to generate a dollar in sales than it cost Google. Yahoo had a $1 billion dollar problem. Combined there were almost $10 billion in redundancies at the companies.
The combined R&D spending ($7.4 billion) and Selling, General & Administrative ($16.3 billion) expenses of MSFT and YHOO totaled $23.7 billion in 2006. So their redundancies relative to Google amounted to over 42% of total spending. And over 85% of those same redundancies belong to Microsoft. These could be reduced without shelling out $45 billion for Yahoo.
For the details see my April 16, 2007 article “Microsoft’s $8 Billion Problem” at www.customersandcapita...
I thought to think outside the box a bit here... Suppose MSFT wants Yahoo as a portal for Vista (only) users. What can be accomplished by tying that in with a Zune player, and a hand-shake agreement with the MSN-CNBC stuff. It might look like, well, Yahoo for Vista. Considering the sunset of XP and the demise of NT/98/Me/2000, this smacks of a broad stroke to get a basket full of enterprise value, and dedicating it to Vista (2nd gen presumed).
Its not about GOOG or AT&T or AAPL, its about MSFT and THEIR future. If Yahoo users w/o Vista don't like it, theres always the rest of the internet to find a home.
Oh well, in a year or so we'll see if the Feds allow this acquisition, and, at some point, we'll see if Yahoo's BOD is dumb enough to accept the tender.