Pmarca: If Microsoft goes fully hostile on Yahoo
blog.pmarca.com
blog.pmarca.com
(That said, you can't trust much of what he says about Ning, but it is unclear how much of this is pride and how much is spin.)
Also, he can afford to do crazy things like ask a few lawyers what the likely endgames are. But you would think that the SJ Mercury would have done the same thing, and yet their article over the weekend wasn't nearly as good. Compare: http://www.mercurynews.com//ci_9073065?IADID=Search-www.merc...
I'm a hacker who uses Unix on the desktop and develops web applications for a living. I stopped using Yahoo/Altavista for search when Google started up and never went back. Both of these companies are totally irrelevant to me.
It appears that MS is moving into the "red giant" phase of a megacorp where they burn all their cash making as many overpriced acquisions as possible before collapsing into a black hole.
On the other hand, suppose Microsoft then raises its bid
to $33/share, and then News Corp. holds its bid at
$32/share. Could Yahoo's board still take News Corp.'s
bid in preference to Microsoft's? In a word: no. When a
board is presented with multiple offers, it can either
take the highest objective offer or it can turn down all
the offers. It cannot take an offer lower than the
highest objective offer.
Like he says, if part of the offer is in stock, you can use long term projections of the value of that stock as part of the valuation. But it's unlikely Microsoft stock will fall greatly any time soon.
Either way, it will be fun to watch.
"Google has a dual-class share structure that gives Larry Page, Sergey
Brin, and Eric Schmidt de facto total control over the company, and
investors certainly haven't avoided Google's stock as a result.
Yahoo does not have a dual-class share structure, and it's too late to put
one into place now.
If Yahoo did have a dual-class share structure, Yahoo's cofounders would
have been much better situated to block Microsoft from attempting a
takeover.
You can bet that this is being noticed by the founders of every technology
company that might go public from here on out."
Control in a startup is largely determined by percentage ownership and and the composition of the board.
Great cautionary tale: Yahoo's cofounders were really smart people with access vast information resources, yet they clearly missed at least two things, which may be prove to be fatal now. I must never assume that I know enough.
I would comment on one statement:
Microsoft could take its $44 billion and go buy virtually every new Internet company of any consequence founded in the last 10 years...
He means "every consequential Internet company that hasn't already been bought by Google or Yahoo". That's a rather different set.
Particularly in light of the fact that Microsoft doesn't seem to be motivated by a desire to grow their business through innovation. I sense that their real motivation here is to buy a big, expensive label that says INNOVATIVE and plaster it all over Microsoft in an effort to make the company seem relevant. So buying (e.g.) three tiny, modestly profitable, innovative photo-sharing sites, along with their brilliant founders, will not do; Microsoft wants Flickr. Because Flickr has the headlines.
microsoft could swoop in and buy the second choices and get a similar portfolio together quickly, building off of them. their portfolio might be overall crappier, but it will be similar and their weight behind it will be a serious driver.
having said that, i'd think that a big problem they might have is the burning desire to have everything built on .net, and most apps online are not build on .net.
As for .NET, the fact that most startups don't choose it should probably send a pretty strong signal to Microsoft that there is something wrong with it. On the other hand, the .NET team could simply be happy targeting "enterprise webapps" (non-startups), in which case there is nothing wrong with .NET, and something wrong with their acquisition criteria.
So basically, if Microsoft really wanted to pour that $44 billion into buying every up-and-comer, they need to pay attention to the team, and not the implementation, and then back that up by not forcing everything it buys to be rewritten in some Microsoft-sanctioned technology.
That is why the Yahoo acquisition has never made sense to me. Either Microsoft is going to spend inordinate amounts of time converting Yahoo's LAMP stack to it's own ecosystem (and fall way behind Google/ebay), or they are going to finally run a LAMP stack themselves, which seems to undermine the .NET ecosystem (not eating their own dogfood, etc).
Of course, they could fix this problem if they gave up trying to create a parallel, all-Microsoft stack and made their stuff play nice with everything else out there on the wild wild web (with less effort wasted on duplicating existing open technologies).
But that would require Microsoft to make the transition to providing a service (support/training/_ahem_ ad placement/etc) rather than a product (windows/office). When the product simply becomes a means to get people to pay for your service, suddenly giving the product away and making it play well with others is a great idea.
When Google was spinning out new apps every week a few years ago, everyone accused them of just running a lot of loss leaders to feed traffic to adwords. Well of course that is what they were doing. The fallacy was thinking that the apps were supposed to be individually profitable. In reality they are all just 'products' that get people to pay for the 'service' (ad placement). Of course they are going to provide all these products for free. You don't charge people for business cards do you?
Microsoft is trying to do this I think with their subscription model stuff. The problem is that they just charge too much, so there is still an incentive to get around paying. It's like high taxes provide an incentive to find a loophole, whereas low taxes are just easier to pay than avoid. If they gave away Windows and just charged some low amount for automatic updates and remote assistance, they'd probably have a workable business model there. Whether it'd be as profitable as their current model is another consideration.
Anyway, I'm significantly off topic, so I'll rein it in. Wasn't expecting my train of thought on this to run on so long. In summary, I think Microsoft is hosed unless they open up their ecosystem and play nice, and unless they find a new way to give away products and charge for services.
Hackers are clever people. It pays to observe them.
estimations with data to back them up plzkty.
It's not just hand waving. I'd recommend the book by Varian (now Google's chief economist) and Shapiro, "Information Rules". Of course, the strength of "network effects" may be exaggerated in some cases. In others (eBay), they most certainly aren't.
"Ignore basic economic principles at your own risk. Technology changes. Economic laws do not."
Call them 'positive network externalities' or 'demand-side economies of scale' if you want a different term.
"Many public companies have a "staggered" board, where some directors are up for election or reelection each year, but the entire board is never up for reelection in a single year."
"A dual-class share structure is when a company's founding managers or investors own a different kind of stock that gives them voting control of the company even when they don't own a majority of the total shares."