Thursday, December 3, 2009, 5:07AM ET - U.S. Markets open in 4 hours and 23 minutes.
- Home
- Tech Industries
- Topics
- Reporters
- Subscribe
Take the Money and Run: Why Google Deal Is Good for Yahoo
Posted Jun 13, 2008 11:06am EDT by Henry Blodget in Investing, Internet, Venture Capital, M and A, IPOsFrom Silicon Alley Insider, June 13, 2008:
Enough with the trendy Yahoo bashing (YHOO). This is actually a smart deal--way better than the wacky chop-shop plan Microsoft proposed (Microsoft offered to buy 16% of Yahoo for $35? So what? What good does that do anyone? And how were they ever going to separate the search business, anyway?).
In this deal, Yahoo gets:
- $250-$450 of additional free cash flow in Year 1. That's a lot of cash flow! Especially because it doesn't cost Yahoo anything.
- More cash flow in years 2-4, as the deal ramps and Yahoo's search-query share remains meaningful (And some cash flow in years 4-10 with almost no cost, as Yahoo's search-query share dwindles).
- The ability to maintain or phase out Panama as it sees fit. Assuming the Google deal delivers, we expect Yahoo to phase out Panama over the next couple of years, especially as its search share shrinks. It won't tell the regulators this, of course, because then it would be easier for Microsoft to argue (correctly) that this deal will crush Google's competition. But it will always have that option.
- The ability to strike a death-blow to the one other player in the search market with any kind of meaningful share--Microsoft. Microsoft is toast anyway in search, but if it had bought Yahoo it would have been able to hold on a bit longer. Now it has not only not bought Yahoo--it has sent Yahoo into the arms of the enemy.
- A perfectly defensible deal structure that the regulators shouldn't have any real cause to block. (This doesn't mean Microsoft won't scare the regulators into delaying the process for months, of course).
- The freedom to focus on display advertising and AMP, Yahoo's new display serving platform. Yahoo has already lost the search game to Google, and denying that isn't going to help anyone. So it might as well let Google take care of search and focus on what it's still good at--display.
No, this deal won't save Yahoo. Yahoo's search query share is likely to continue to decline, and, as it does, no amount of "monetization" improvement-per-query will matter. But in the years that its search business has left, Yahoo can now focus almost all of its efforts on revitalizing its properties and display business, which is where its future lies.
Yahoo shareholders will likely have to wait a long while to get back to the $34-$35 Jerry could have had for the asking in mid-February. But with this deal and strong execution over the next few years, there's a good chance they won't be waiting in vain forever.
See Also: At Long Last...The Yahoo-Google Search Deal
24 Comments
Yahoo! Finance User - Friday June 13, 2008 11:27AM EDT
Henry is full of crap on this one. What he is saying is that Yahoo is simply a portal company now that they will outsource to Goog - if true - there is no money in that for the long term. Hell, every big ISP has their own portal, and why would some use Yahoo as its home page going into the future? Actually iGoog is much better than Yahoo!... I use it and its much crisper without all that Yahoo! 1995 look and feel.
spiz - Friday June 13, 2008 11:29AM EDT
I feel YHOOs in between a rock and a hard place now. They weren't ready to give it up before at $31/share to MSFT and they feel they have some leverage within GOOG. Long tough road for them I feel but heck it's Yahoo people...they're a staple of the internet Might be time to get back in with them as they're prices are dropping to pre-merger talks realms.
David - Friday June 13, 2008 11:30AM EDT
I agree. This deal means Yahoo wants to become a content company and abandon one of the most profitable areas. I can't see how regulators can approve this. As a search engine advertiser or a search engine user a google monopoly is no good for anyone. Microsoft+Yahoo would present a viable competitor to search engine marketing leader Google. I still think it will happen at some point...
Adam G - Friday June 13, 2008 11:31AM EDT
Agree with Fearless Rick. I would love to know who is paying you to write such garbage. As an investor, I cannot tell you how happy I am that YHOO decided to go with something that will earn 400,000,000 instead of $47,000,000,000 from MSFT. What an amazing deal. In fact, it is SUCH a great deal that the stock has gone up from where it was at $26.50. OH wait, it's down to 22. Down almost 20%. Great business decision in deed. You can count my vote to Ichan and his board.
Yahoo! Finance User - Friday June 13, 2008 11:34AM EDT
Yahoo needs to go on the hunt, Local.com and Marchex should be taken out asap.Local.com has local search and mobile 411 patents that both Microsoft and Google will want in the future I think.
Yahoo! Finance User - Friday June 13, 2008 11:38AM EDT
Henry - you're lost... you say yahoo's been very conservative, so they're likely giving conservative estimates here... Hello???!?? things have changed Hank. This company is in serious spin mode.... my guess is Sue & Jerry will say anything today to hope to see some positive spin in the press to save their jobs... Henry's lost on this one...
Yahoo! Finance User - Friday June 13, 2008 11:40AM EDT
Man, things must not be looking good behind the scenes at Yahoo!. I mean they got Blodget rambling on for 6 minutes trying to convince us that shares will not be in the toilet after the summer. Six minutes to say " well, Yahoo! search is a useless money loser, so what if they basically give it away to Google." Yet when Microsoft was offering real money, Yahoo! search was the best thing since warm vagina and tacos! I am glad I sold my Yahoo shares the day the deal was announced in January.
Yahoo! Finance User - Friday June 13, 2008 11:41AM EDT
1st time in a while where i've thought Henry was way off base... you know, if toyota dealerships started selling hondas, they could cut all of that expense around manufacturing and R&D ... that too would be a great deal... free cash flow from selling honda's cars!!! wake up Henry!!
Yahoo! Finance User - Friday June 13, 2008 11:43AM EDT
Man, things must not be looking good behind the scenes at Yahoo!. I mean they got Blodget rambling on for 6 minutes trying to convince us that shares will not be in the toilet after the summer. Six minutes to say " well, Yahoo! search is a useless money loser, so what if they basically give it away to Google." Yet when Microsoft was offering real money, Yahoo! search was the best thing since warm vagina and tacos! I am glad I sold my Yahoo shares the day the deal was announced in January.
Emeka O - Friday June 13, 2008 11:43AM EDT
win 4 yahoo. Yahoo maintains its search and display ad business. loss for msft. win for google.
Paul L - Friday June 13, 2008 11:48AM EDT
Celebrating the beginning of the End! Yahoo! is just going to be another website portal... Yaaooohhhnoooooooooooo!
Vafer - Friday June 13, 2008 11:53AM EDT
If yahoo search is going to zero, and msft wanted to buy it for $33 why not? Split yahoo in two, the display/portal business and hte search. That totally makes sense unless theres a tech issue. Sell the search to msft, merge the other half with Google. (google/yahoo cultures are compatible) I mostly search with Google but spend most of the time on my.yahoo.com portal. Why yahoo couldn't do a better job incorporating ads into the portal, is a mystery to me. Tons of eyeballs on the portal.
Dan - Friday June 13, 2008 11:54AM EDT
Carl is maintaining that the Yahoo Board isn't working in the best interest of the shareholders. It will make the takeover easier and any shareholder lawsuits proceed quicker. Thanks for nothing Yahoo.
Yahoo! Finance User - Friday June 13, 2008 11:56AM EDT
With this deal Yahoo will be at the mercy of Google in the future.
Yahoo! Finance User - Friday June 13, 2008 12:15PM EDT
Stop digging hole when you know you will not be able get out of the hole. I use yahoo finance and love it but dont tell me that Google deal will maximize shareholder value in long term.
Yahoo! Finance User - Friday June 13, 2008 12:29PM EDT
I feel like taking Yang aside and saying "Fat, drunk and stupid is no way to go through life, son." OK, he's not fat, drunk or stupid -- but he's acting that way.
RoderickL - Friday June 13, 2008 02:50PM EDT
Obviously, the author of this very vague article is not a Yahoo shareholder nor does he have Yahoo’s best interest in mind. Yahoo passed on 34-40 billion deal in favor of an 800 million dollar alliance with Google, where’s the logic behind that? By the way, how much did they pay you to write this article? “A 34-40 billion dollar bird in hand is better than two 800 million dollar birds in the bush” HvyOnEz!
RoderickL - Friday June 13, 2008 02:53PM EDT
Obviously, the author of this very vague article is not a Yahoo shareholder nor does he have Yahoo’s best interest in mind. Yahoo passed on 34-40 billion deal in favor of an 800 million dollar alliance with Google, where’s the logic behind that? By the way, how much did they pay you to write this article? “A 34-40 billion dollar bird in hand is better than two 800 million dollar birds in the bush” HvyOnEz!
Want to post a comment? Sign in now to begin.
Recent Posts
Copyright/IP Policy - Terms of Service - Privacy Policy - Help
Quotes delayed, except where indicated otherwise. Delay times are 15 mins for NASDAQ, NYSE and Amex. See also delay times for other exchanges.
Quotes and other information supplied by independent providers identified on the Yahoo! Finance partner page. Quotes are updated automatically, but will be turned off after 25 minutes of inactivity. Quotes are delayed at least 15 minutes for NASDAQ, NYSE and Amex. See also delay times for other exchanges. Real-Time continuous streaming quotes are available through our premium service. You may turn streaming quotes on or off. Fundamental company data provided by Capital IQ. Financials data provided by Edgar Online. Historical chart data and daily updates provided by Commodity Systems, Inc. (CSI). International historical chart data, daily updates, fund summary, fund performance, dividend data and Morningstar Index data provided by Morningstar, Inc. Analyst estimates data provided by Thomson Financial Network. All data provided by Thomson Financial Network is based solely upon research information provided by third party analysts. Yahoo! has not reviewed, and in no way endorses the validity of such data. Yahoo! and ThomsonFN shall not be liable for any actions taken in reliance thereon. All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.
Fearless Rick - Friday June 13, 2008 11:17AM EDT
How much do they pay you guys to write this drivel? Any partnership with Google is just the beginning of the end for Yahoo.