MSFTextrememakeover

Thursday, February 07, 2008

Media Roundup

1) Mark Cuban wades in:

(I respect Cuban, but he must not own MSFT shares)

2) Review of various integration scenarios:

(#1 role model: HP/Compaq. Um, didn't that one initially screw up so badly that the stock nosedived and the original CEO got the boot? On second thought...)

3) Others, besides YHOO's owners, who stand to make a killing:

(MSFT shareholders get to supply the blood)

4) An absolutely scathing review of MSFT:

Excerpt (bolding mine):

Ask investors what they think of Microsoft's innovative juices. The company's stock market value is huge – $280-billion (U.S.) – but it goes for 15 times earnings. Compare that to a far less profitable information company like Thomson Corp., which has no true monopolies (and is a part-owner of this newspaper). At a 10th the market cap, Thomson changes hands for 21 times forward earnings.

Why? We would argue that it's at least in part because Thomson is much more careful with shareholders' money. Thomson investors are rarely diluted by acquisitions or by squandered investments. It's hard to argue with millions of investors.

(Hmm..less "careful with shareholder money"? √ Constantly diluting us by "acquisitions or by squandered investments"? √√ Arguing with millions of investors? √√√).

5) The most succinct but insightful comment I've seen yet on this market space. Ballmer would be well advised to pay attention to the same input:

Excerpt (bolding mine):

Yahoo lost sight of who they are and who their customers are. Yahoo's perception is that their only competitor is Google. But 95 percent of their revenue comes from advertising -- so their competitors are really the broadcast TV networks. They think they're in the search game,when they should really be in the brand advertising game.

(Oh, and hire this person)

6) Analyst Trip Chowdry provides some comic relief with a fantasy conspiracy theory worthy of Oliver Stone:

(If only Ballmer were that strategic and cunning. He's neither.)

7) The sad reality:

(Near 100% chance MSFT shareholders lose money either way though)

8) Finally, the no-brainer trade now that MSFT management have effectively told us they've revisited the future and that what appeared to be incredibly bright initially, turned out to be just the approaching headlights of a Mack truck traveling full tilt with glamour tags reading:

(Cue sound of air horn)

Meanwhile, another selloff for MSFT on 2X average daily volume:


 

Update:

Worth a read...

Excerpt:

I know you want to make your mark on Microsoft, but you should stop trying to be all things to all people. Take a tip on focus from that other Steve.

Dear Steve,

 

Let's talk over this Yahoo! (YHOO) thing before you move ahead. It's a profoundly bad idea.

Also:

(Some possibly good news here. Especially since Capital Research is the largest institutional shareholder of both companies, and therefore has much more potentially at risk on the MSFT side)

Update #2:

More... um, "praise" for the deal:

Excerpt:

He is especially frustrated by Gates's pursuit of his white whale when Microsoft has bigger fish to fry, like parrying the challenge from free operating systems like Linux; adapting to the migration of computing from the desktop to the cloud, and competing with Apple as it insinuates its hardware and software into people's living rooms, cars and telephones....

 

"Just now, when they've got momentum, they're going to crush it with this terrible deal," Mowrey said. "I think Microsoft is worth a lot less today than I thought it was worth yesterday."

Excerpt:

"This is totally insane," says Shareholder Value Management analyst Jeff Embersits. "There's no way Yahoo's worth $44 billion. Period. [Yahoo Management] should fall on their knees, kiss the ground and go home and buy Porsches."

("Insane" seems to be popping up a lot when describing this deal.)

11 Comments:

  • You're really upset about this. (Me too BTW). Lots of posts in a short time...

    So tell me...what are we going to do about it. Picket with me at 34? Big pile of dog poo waiting in his parking spot? Seriously, there has to be some action here for employees to voice concern, need for change.

    By Anonymous Anonymous, at 7:48 PM  

  • "You're really upset about this."

    Yes, this deal isn't an investment, it's a high stakes crapshoot. There's little imo that employees can do. It's up to external shareholders. And unfortunately the best way for them to kill the deal is to sell - which they've been doing. If the largest institutional holders suddenly grew a spine, then they could perhaps deter Ballmer. Otherwise, it's up to YHOO finding some other option and rejecting the deal.

    By Blogger MSFTextrememakeover, at 8:56 AM  

  • Further to my comment above, see two articles:

    YAHOO! PRICE TALKS

    Excerpt:

    "February 8, 2008 -- Yahoo!'s largest investor met yesterday with Microsoft boss Steve Ballmer and other executives in an effort to gauge whether the software giant is willing to increase its already sweet $44.6 billion takeover offer, The Post has learned.

    Capital Research and Management, which owns roughly 11.4 percent Yahoo! shares and over 6 percent of Microsoft shares, is interested in better understanding how Ballmer plans to use the acquisition of Yahoo! to boost profits.

    They also want to know how much more Microsoft would be willing to pay if Yahoo!'s board rejects the initial offer, sources said.

    "They want to make sure they won't lose more money on their Microsoft stake than they will gain from their position in Yahoo!," said one person familiar with the meeting."

    (Interesting how that kind of access and discussion doesn't violate selective disclosure laws. Oh well, one rule for large holders, another for everyone else)

    Also, YHOO's board is reportedly meeting today to discuss options:

    Yahoo Board Reportedly To Meet On Microsoft Bid Today

    By Blogger MSFTextrememakeover, at 9:42 AM  

  • I am so upset over this deal that all I see Ballmer's monkey act over Yahoo's dead body. As an ex-microsoftie a large chunk of my stocks consist of microsoft shares that are going down in value every day. I guess we learn from mistake. I will not keep even a single msft stock. This ship is going down. Hope James Cameron is ready for another Titanic.
    http://valueinvestmentblog.com/

    By Blogger Vikas Agarwal, at 1:40 PM  

  • I keep hoping that this is all part of some brilliant strategic move, and that Steve secretly plans for the bid to be rejected, having shook up the whole industry in the process.

    But my instinct tells me this isn't so, and Steve has lost it. He's not managing, he's playing poker, and this bid was the equivalent of going "all-in" holding only King high.

    I am all for a CEO with the guts to make big risk "bet the company" moves, but not like this. Steve would have been better off gathering up about 10 billion in cash and just setting fire to it in the parking lot. Far less damage would have been done.

    Even if this turns out to be just a gigantic bluff and we get away with it scott (and Yahoo) free, we've just shown the whole world what our management thinks of our online strategy.

    Analysts and shareholders will take note.

    By Anonymous Anonymous, at 12:49 AM  

  • Now, I can't say that your analyses are not convincing and - disclaimer - I sold off my MSFT long ago.

    But I am a user of GOOG products and services; I buy advertising from them and I can tell you their arrogance and evil ways would but the best Ballmer rants to a shame.

    So yes, I do think 44bn is insane but I desperately hope they succeed to give Google some competition.

    By Anonymous Gianni, at 1:32 AM  

  • Hey, on the plus side, at least you are using MoneyCentral for your MSFT ticker data, so you can't be 100% disgusted with OSG/MSN.

    By Anonymous Anonymous, at 12:27 AM  

  • "Hey, on the plus side, at least you are using MoneyCentral for your MSFT ticker data, so you can't be 100% disgusted with OSG/MSN."

    I'm overall disappointed with the strategy and execution of OSG/MSN. The services themselves in most cases aren't the problem - some are even quite superior.

    By Blogger MSFTextrememakeover, at 8:49 AM  

  • Employees need to stop wishfully believing that there is some secret brilliant logic to this deal or that shareholders will 'do something' to stop it.

    Shareholders will most likely do nothing to stop this deal, so it really is up to employees to finally take a stand and stop 'hoping' that there is some hidden genius in upper management's fumbling moves. How much evidence do you need? Ballmer and Co. have demonstrated over and over that they are both clueless and clumsy.

    There are at least 2 kinds of MSFT shareholders. The ones who 'get it' already sold or are selling, so they have no say. The ones who still hold are the 'value' type investors who don't really understand the business. These guys invest based on concepts like 'reversion to the mean'. They see MSFT's glorious past and assume that Mr. Market has temporarily lost his mind but will eventually value MSFT like in days past. These shareholders are about as clueful as Ballmer when it comes to actually understanding Microsoft's business and the tech industry in general. It's hard to believe that tens of billions of dollars are invested this way, but it is true.

    So, shareholders aren't going to do anything to block this deal since the ones who remain are as dumb or dumber than Ballmer. It's up to the employees to collectively and credibly voice their disapproval. This deal is obviously bad beyond belief (financially, strategically, technologically, etc.) and wishfully thinking that Ballmer has some clever ace up his sleeve is self-delusional. As always, he's got nothing. As usual, he will drag you down with him (Which is fine, except he's a billionaire and you're not). If you are an employee and you care about Microsoft's future at all, it's time to do something.

    By Anonymous Anonymous, at 10:57 AM  

  • it ain't over till it's over

    By Anonymous cindy, at 6:21 AM  

  • Share buy-backs are never a good idea - to couple your own fate with your own fate is a de-stabilising positive feed-back loop as a cybernetician would say. That idea of "there's no better investment than in ourselves" is a myth and dangerous arrogance.

    By Anonymous CrisisMaven, at 4:34 AM  

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