Archive for May 6th, 2008
Posted by: in Latest News
Filed under: Deals, Internet, Competitive strategy, Microsoft (MSFT), Yahoo! (YHOO)
The dust is settling after the withdrawn buy offer of Yahoo Inc. (NASDAQ: YHOO) by Microsoft Corporation (NASDAQ: MSFT). During that fascinating process, speculation ran high as to why Steve Ballmer selected the strategy that he did. People were asking what the probable outcomes could be and what would possibly be created by the acquisition. What I have found to be lacking in the realm of the public keyboard is a synopsis of what exactly Steve Ballmer has accomplished through this seemingly fruitless process.
First, Mr. Ballmer got answers to some critical questions about Yahoo CEO, Jerry Yang. Not only did he get those answers for himself, but he laid them out for all the world to see. He has determined that Yang is a gambler, albeit a questionable one. Yang gambled righteously with his counter offer (read that bluff) of $37 per share. Note that Ballmer didn’t call that bluff. He neatly folded his winning hand.
It has also been shown that Yang is nothing even close to what might be considered a negotiator. It would seem that he and his Yahoo cohorts selected not to analyze alternative options. They simply adopted a take it or leave it stance. I submit to you that Yang and team could have offered a hundred different deal proposals in an effort to keep Microsoft at the table until it softened. Instead, it seems they pushed their plates back at the cook claiming they didn’t want what was served.
Next, we’ve the wedges that Ballmer has driven, one between Yang and his company, another between the company and it’s investors. Perhaps Yang can heal the wounds inflicted upon his control as chief executive, but the rift created between the Yahoo board and the company’s share holders shall now remain a festering wound. Perhaps the deepest and most damaging wedge is that one driven between the Yahoo! brand and investors at massive. That wedge was precisely placed in the fissure begun by Yang’s phantom Yahoo turnaround plan.
Finally, we can only speculate upon what the future holds in light of past events. I think I’m safe in believing that Steve Ballmer isn’t too stressed about how this all played out. Even though he is clearly concerned about Microsoft’s Internet related losses, I think if he expected that Yahoo would be Microsoft’s salvation, he’d not have struck at that company both branch and root. Now, Yang and Yahoo are left with nothing to do but defend what was already a shakily performing platform in terms of growth. Not only does Jerry Yang need to prove that he has the ability to turn the company around as he needed to before, now he’s in the position where he has to also financially justify his inflated counter offer. This, to appease an investor base which was already growing impatient.
Note: At the time of this writing, Yahoo shares have gained over 6% for the day.
Gary Sattler is a freelance blogger. He does not knowingly hold interest in the companies mentioned in this blog post.
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Posted by: in Latest News
Filed under: Deals, Consumer experience, US Airways Group (LCC), UAL Corp (UAUA), Delta Air Lines (DAL)
Higher oil prices and the surging aviation fuel costs they imply might reduce the benefits of an airliner merger, such as the potential deal between United Airlines and U.S. Airways, but they don’t eliminate a merger’s long-term positives, an analyst argued Tuesday.
Further, C. Leonard Bauer, independent stock analyst, told BloggingStocks Tuesday the potential United-US Airways union would benefit the sector in that it would be the second merger this year among major airlines in the United States, also known as the legacy carriers.
Shares of UAL Corp. (NYSE: UAUA), parent of United Airlines, are down 88 cents to $14.10, while US Airways (NYSE: LCC) are down 55 cents to $7.79 in Tuesday trading.
Sector right-sizing
“The deal would take another legacy carrier off the table, after the Delta-Northwest merger, and that can only help the sector from an earnings standpoint,” Bauer stated. “The United Says airline sector leads the league in airline route redundancy and duplicate hubs. This second deal would further tighten the sector.”
And as travelers might sense, that elimination of redundancy would increase airfares, at least initially — an unpleasant circumstance for travelers, but a positive, and needed, development for airlines, Bauer said.
“The unvarnished truth of the matter is that airfares [in the U.S.] have been under-priced due to a surplus of carriers. Fares have to go up to get airline margins where they should be,” Bauer said. “Fuel costs will also add to fares, but long-term a better air travel system for the public will emerge.” Bauer added that he does not have a rating on nor own shares in any airline.
Customer service impact
Some state a United-US Airways merger, immediately after the Delta-Northwest merger, would further hurt customer service by eliminating competition. That’s a slightly simplistic assessment, states Bauer.
“The less competition, worse service logic applies in selected business cases, but not all,” Bauer stated. “With the airlines, you have to think slightly down the runway. Right now a considerable portion of an airline’s resources is wasted in redundant, duplicate operations. The merger would allow the combined company to allocate resources more effectively to improve service.” However, Bauer admitted that as part of the process certain flights would be phased-out, with large cutbacks possible at certain hubs.
However, amid the domestic airfare pain, Bauer said their will be pleasant surprises. The carriers may lower fares for international routes to attract customers, as they position themselves for the expected, big increase in international travel in the decade ahead.
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Posted by: in Latest News
Filed under: Deals, Microsoft (MSFT), Yahoo! (YHOO), Apple Inc (AAPL), AT and T (T), Sprint Nextel Corp (S), Verizon Communications (VZ)
 So The Wall Street Journal reports today — according to its favorite “people familiar with the situation” sentence — that wireless provider Sprint Nextel Corp. (NYSE: S) is considering spinning off or selling its Nextel unit. This is when I hear the screeching sound of a needle scraping a record. Say what? Should we play that again?
I guess I shouldn’t really be that surprised since the $35 billion acquisition of Nextel Communications Inc. in 2005 has always seemed, to say it mildly, challenging. This would be, as the Journal puts it, “a dramatic acknowledgment” that the merger has actually been a failure.
Well, only Monday we heard that Deutsche Telekom AG (NYSE: DT) might be interested in Sprint. Could it be that either Deutsche Telekom demanded such an action, or that Sprint management decided such an action could entice DT to indeed go forward with an offer (despite the probable problems such a merger could face, as Jonathan Berr outlined in his post Monday)? Without Nextel, Sprint would rid itself of much debt. It is also considered to have superior handsets and fewer dropped calls, making it a more attractive target.
The differences in corporate culture made the now three-year-old merger difficult and Sprint has lost subscribers while its competitors added them. Of course, the stock price has suffered as well, down over 60% since the merger. No wonder then that Sprint is looking to undo the merger. The Journal lists several options, including selling Nextel to a consortium of investors related to Nextel’s founder Morgan O’Brien. Other possibilities of course include private equity firms, or a spin off of Nextel.
Sprint, the third largest wireless carrier in the U.S., is facing several problems these days and has been losing in its competitive efforts against AT&T Inc. (NYSE: T), which won an exclusive deal with Apple Inc. (NASDAQ: AAPL) to sell the iPhone, and Verizon Wireless, a joint venture between Verizon Communications Inc. (NYSE: VZ) and Vodafone Group Plc. (NYSE: VOD) — the latter, incidentally, also announced a deal with Apple to sell the iPhone in 10 countries.
Sprint’s stock is up nearly 3% on the news. While this could be a real positive for Sprint, it is nevertheless going forward with other strategic actions — and perhaps neglecting to focus on the Nextel issue.
Naturally, with the recent speaks between Yahoo! Inc. (NASDAQ: YHOO) and Microsoft Corp. (NASDAQ: MSFT), one can only wonder what could be the outcome of such a merger. While it’s not to state that there haven’t been large successful mergers, this is a reminder of what a bad one can be like.
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Posted by: in Latest News
Filed under: Deals, Google (GOOG), Microsoft (MSFT), Yahoo! (YHOO)
 Although Microsoft Corp. (NASDAQ: MSFT) could have upped its offer for Yahoo, Inc. (NASDAQ: YHOO) this past weekend, it didn’t. Microsoft CEO Steve Ballmer walked away from the deal after Yahoo held out for more money. At this time, Microsoft was wise to walk away from Jerry Yang’s ego. The reason? No company should spend over $40 billion for a bunch of unmonetized eyeballs. But then again, Microsoft needs to up its game in the consumer space; not so much in the enterprise business space.
Yahoo! has one of the most lucrative audiences on the web, if not the most lucrative. The company, to save its life, can’t figure out how to continuously grow revenue with that big audience it has. I won’t beat a dead horse here, but if Yahoo! thinks it’s really worth $37 per share, some reality needs to be put in its pipe and smoked. Microsoft would have purchased the rights to combine its ailing World wide web properties with a big audience that Yahoo! can’t seem to squeeze money out of with any kind of strategy. Customers want everything for free, but Yahoo! doesn’t have the advertising strategy down to allow that. We have the ability to thank former CEO Terry Semel for that.
And the kicker is this: If Google, Inc. (NASDAQ: GOOG) will soon be providing Yahoo! with its search infrastructure (after a successful test), just what was Microsoft buying, anyway? Engineering talent? Employees with a combative culture? We all know Microsoft wanted Yahoo! badly, but the mixing of oil and water here wouldn’t have instantly made a neat company or anything. And Yahoo!? It’s not worth what it thinks it is. Period. Get over it, find out how to more effectively compete and monetize those eyeballs — then come back to the table if anyone will sit there with you then.
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Posted by: in Latest News
Filed under: Deals, Microsoft (MSFT), Yahoo! (YHOO), Market matters, Cramer on BloggingStocks
 TheStreet.com’s Jim Cramer says Filo and Yang own less than 10% of Yahoo! shares, so they can stall a deal but not stop it.
Two guys with less than 10% of the shares outstanding blocked this Yahoo! (NASDAQ: YHOO) (Cramer’s Take) deal — Jerry Yang and David Filo. I understand this logic. They’re founders. They probably hate Microsoft (NASDAQ: MSFT) (Cramer’s Take). They feel tremendous pride. They think that surrendering to Microsoft would be like giving in to the Evil Empire.
But if they felt that, they should never have brought the company public. Once you are public you’re for sale, either in pieces or all together, unless you’ve one of those travesty two-classes-of-stock configurations that I think shouldn’t even be allowed and have almost always been disappointing.
So what happens? I think the stock acted very well yesterday. It should have been down more. I think what happened is that arbs looked at the holders and realized that if they purchased up enough stock that was for sale they could force a sale or a new board of directors. Might take a year, but if you can buy something at $24 and sell it at $34 a year from now, well, let’s just say that is a large win.
This is an entrenched management situation. They think they own the company. They don’t. They’ve less than 10%. A couple of aggressive guys, including people who know the game, like Carl Icahn, will have Filo and Yang out on their butts next year at this time.
Which is why the stock didn’t go to $22 and probably won’t go much lower.
Two guys with 10% can hold off the cavalry, but they can’t stop it.
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Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com’s sites and serves as an adviser to the company’s CEO. At the time of publication, Cramer had no positions in stocks mentioned.
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Posted by: in Latest News
Filed under: Earnings reports, Forecasts, Deals, Bad news, Industry, Employees, Housing
 UBS (NYSE:UBS) is making a bid to increase the unemployment rate all on its own. The bank will lay-off 5,500 people, mostly investment bankers. It will also sell a package of $15 billion portfolio of subprime mortgages to Blackrock (NYSE:BLK). According to Reuters,”UBS cautioned that conditions in financial markets were still tough and declined to offer any results forecast.”
The UBS comments about what happens next are a coded message that layoffs at the firm may not be over. UBS has suffered as much or more from subprime write-downs as any bank in the US or abroad.
The news is especially bad for people employed at brokerages and big banks. A continuing spike in mortgage defaults could cause more difficulty in the pool of financial instruments created around the market. That, in turn, could cause more write-offs at huge banks triggering the need to raise capital and cut costs.
Tens of thousands of people have been fired on Wall Street already. The news out of UBS shows that the process is far from over.
Douglas A. McIntyre is an editor at 247wallst.com.
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Posted by: in Latest News
Filed under: Before the bell, Earnings reports, Deals, Microsoft (MSFT), Yahoo! (YHOO), Cisco Systems (CSCO), Market matters, Walt Disney (DIS), Federal Natl Mtge (FNM), Merck and Co (MRK), Qwest Communications Intl (Q), Oil
 Stock futures were lower early Tuesday morning as oil prices remained high offsetting any recent optimism about the economy in light of Monday’s surprise expansion in the service sector. Several companies are also reporting earnings today and will be in focus.
U.S. stocks dropped on Monday after Microsoft withdrew its takeover bid for Yahoo and as commodity prices once again spiked. The Dow industrials lost 88 points, or 0.68%, the Nasdaq Composite fell 12 points, or 0.52%, and the S&P 500 lost 6 points, or 0.45%.
Without much economic news today, no doubt investors will have no choice but to focus on the high oil prices. After setting a record close Monday and hitting a new trading high of $120.93 a barrel Tuesday, crude retreated to $119.88, down 9 cents from Monday’s close. It is interesting that just as hopes were growing the slowdown of the US economy might not be as deep and long as originally thought, crude prices surge again, concerning investors about inflation and profits once again.
Several companies are reporting financial results this day including Fannie Mae (NYSE: FNM) and Qwest Communications (NYSE: Q). Disney (NYSE: DIS) and Cisco Systems (NYSE: CSCO) post results after the market close.
Also, the saga between Yahoo (NASDAQ: YHOO) and Microsoft (NASDAQ: MSFT) has not ended as Yahoo CEO Jerry Yang is said to still be open to a Microsoft takeover.
Swiss banking giant UBS AG (NYSE: UBS) announced Tuesday it would cut 5,500 jobs and reported a net loss of $10.97 billion for the first quarter.
Merck (NYSE: MRK) said Monday that it plans to cut 1,200 sales jobs, 15% of its sales workforce. The announcement comes after last week the FDA rejected Merck’s experimental Cordaptive drug.
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