"Yahoo’s board has been negligent in their duties, fiduciary and care"
says Jeff Nolan speaking for many as Microsoft delivers the ultimatum to Yahoo!
I could say the same for Microsoft's board. I have not seen clear answers to questions like:
Why make such a whopper investment, when mega-mergers fail at astonishing rates?
Why not invest it in the enterprise business which is currently the bread and butter for the company, but could use more focus?
Is this all about Google focus when it should be as focused on Apple, Oracle, IBM, SAP, VMWare, Cisco, Sun and other segment competitors?
Vinnie,
There's a big difference between the speculative investments you are proposing vs. the actual offer on the table that YHOO shareholders are being denied.
Duties of care and fiduciary are legal duties the board members are responsible for upholding, in this case they are at risk of breaching those duties.
Where you differ with MSFT is a matter of opinion, where I differ with YHOO is that there is an actual offer that the shareholders are unable to act on because YHOO's board is the obstacle.
You constantly bitch at MSFT about focusing on GOOG, well they should. GOOG is valued at 10x trailing 12 sales, even today, while MSFT is valued at 5.3 trailing 12 month sales. You invest where the asset valuation is greater, and where you generate more cash flows, and GOOG outpaces MSFT on that front by a pretty wide margin as well. I just don't know why you have such an issue about accepting the notion that MSFT is responsible to the owners of the company first and foremost, and if they fail in that regard then the market will punish them on both ends... but it's also statistically evident that despite their lack of focus on enterprise software that they have done a very good job at building that part of the business, which discredits your assertion that they aren't investing there.
If you were king of Microsoft for a day the company would not be in mobile devices, consumer operating systems, game consoles and titles as well as online, any of their consumer services, email, automobile telematics, and much more... and where would the company be then? I'll tell you, all their eggs in one basket and about half of their market cap gone away.
Posted by: Jeff Nolan | April 06, 2008 at 04:08 AM
Sorry, Jeff...it is a very fair question for the board to explain why such a big investment when the industry has a pretty bad record with mega-mergers.
about Google's 10X focus..what about also a focus on Apple, VMWare? And show me a company which sustains such high multiples with acquisitions, not organic competence. Some things cannot be grafted on.
about eggs in one basket...MS sells a wide range of Office, OS (including mobile), middleware, database, communication, apps to the enterprise - probably the most complete stack there is. And it is hugely profitable and makes up for subsidies for Office to consumers, students, all the problems with XBox etc, It may enjoy consumer and search stuff but should not the core get much of the investment?
Posted by: vinnie mirchandani | April 06, 2008 at 04:59 AM
Vinnie,
Microsoft is attacking VMware, Hyper-V. Plus just last month they acquired Kidaro to expand desktop virtualization capabilities.
They have a serious cancer in Apple but you can't go after Apple simply by going after Mac OSX, and at any rate it would take years to get Vista turned around but what alternative do they have? Mobile handsets that appeal to consumers and digital media all play to the competitive dynamic with Apple. These are not enterprisey so to you they should not be invested in.
I think it's pretty hard for you to suggest that just capitulating the gaming market to Sony and Nintendo is a winning strategy when in the 2nd quarter alone they generated over $4 billion in revenue from games and continued to be profitable, contributing to their raising of full year guidance. And it's not enterprisey and no it doens't get subsidized by enterprise.
Insofar as large mergers not working, this is a popular theme and statistically it is not incorrect. Having said that, there are examples of large mergers that do work and in the case of msft the yahoo assets dovetail very nicely. Consumer services and search require overinvestment at this point in order to establish a leadership position, and nobody is going to be happy with MSFT saying they are content with trailing badly in any category.
The company continues to generate a spectacular amount of cash and maintains a very healthy balance sheet so on balance I don't think you have anything to complain about. Just because you don't like the direction of their enterprise business does not mean that they are going in the wrong direction.
BTW, thanks for eliminating captchas.
Posted by: Jeff Nolan | April 06, 2008 at 12:02 PM
Jeff, rightly or wrongly the average CIO believes he.she is subsidizing MS consumer and ad business. Frankly they would rather see the torrent of bugs fixed, and more attention to the enterprisey stuff. Not as if MS is doing a good job in many areas.
But as you will point out, they are not the investors. MS's board does not have to listen to them
Posted by: vinnie mirchandani | April 06, 2008 at 12:30 PM