CNET News reports that Microsoft Corp. (NASDAQ: MSFT) has officially withdrawn its offer to acquire Yahoo! (NASDAQ: YHOO). Reportedly the two sides could not agree on price -- Microsoft was willing to go up to $33 a share but Yahoo! wanted $37 -- $5 billion more than Microsoft was prepared to spend.
Steve Ballmer also decided against a proxy fight for Yahoo! shareholder support -- suggesting that it would be a time consuming and costly process that would give Yahoo! more time to make itself a less desirable acquisition for Microsoft.
Is this really the end of it? I expect Yahoo!'s stock to tumble and Microsoft's to rise. Yahoo! stock was trading up to $29.70 in the after hours market as of 8pm last night. But I expect the stock to plummet to where it was before Microsoft made its offer -- $19 a share.
Sometimes in a period of uncertainty, a look back can provide some perspective. So here are a few highlights from BloggingStocks on March 16, 2007,a year ago today.
Microsoft Corp.'s (NASDAQ: MSFT) CEO, Steve Ballmer, received what could be considered a mere pittance of a paycheck for the world's largest software company in its most recent fiscal year. In Microsoft's 2007 fiscal period, profit at the company rose about $14 billion on over $50 billion in sales. Ballmer's pay for leading the company during that period? $1.3 million.
Yes, in a salary that would make most hedge fund managers wince, Ballmer scored a $620,000 in salary and another $650,000 in bonus pay. While stock options are generally the most prudent way to pay some executives these days (to the tune of tens of millions of shares), the tiny pay Ballmer received sounds like a mistake until once reads that it is true.
In perfect employee fashion, Microsoft also matched Ballmer's 401k contributions with $6,750 in matching funds as well as spending $3,000 on life insurance and athletic club memberships for the CEO. Even a billion-dollar paycheck would be a bargain for a company whose profit reached $14 billion in the latest fiscal year, although Ballmer received a fraction of that amount.
Now, why Microsoft shares has hovered in la-la-land during one of the most profitable years in the company's 30-year history is the largest question mark. My guess? Google, Inc. (NASDAQ: GOOG) is stealing the thunder from every tech company with its constantly expanding revenue every quarter.
Volatility Index S&P 500 Options-VIX up 0.24 to 13.53
Advanced Micro Devices Inc. (NYSE:AMD) calls (quoted in Pennies) busy on chatter of private equity cash infusion. AMD is recently up $0.46 to $13.87. AMD has been frequently subject to LBO chatter; today chatter is circulating that a friendly private equity-strategic partner could surface to make cash infusion. Speculation is that AMD could announce a deal similar to the deal Sun Microsystems Inc. (NASDAQ:SUNW) announced on 1/23/07, when it received a $700 million dollar private placement from KKR. AMD call option volume of 73,560 contracts compares to put volume of 9,747 contracts. AMD April option implied volatility of 41 is below its 26-week average of 45 according to Track Data, suggesting decreasing price risks.
eBay Inc. (NASDAQ:EBAY) implied volatility is low. Meg Whitman enters ninth-year working as eBay CEO. EBAY is recently up $0.23 to $31.72. Meg Whitman has an estimated net worth of $1.2 billion according to Forbes, much of it in EBAY stock. Years ago, Whitman said she would leave EBAY after eight to ten years. Whitman joined EBAY in 1998. EBAY has a market cap of $43 billion. Microsoft Corp. (NASDAQ:MSFT) has a market cap of $270 billion. EBAY overall option implied volatility of 34 is below its 26-week average of 37 according to Track Data, indicating decreasing risks.
Option volume leaders today are: SanDisk Corp. (NASDAQ:SNDK), AtheroGenics Inc. (NASDAQ:AGIX), Halliburton Co. (NYSE:HAL) and Qualcomm Inc. (NASDAQ:QCOM).
Note: The Daily Option Update is provided by Stock Options Specialist Paul Foster of theflyonthewall.com.
When Tom Taulli wrote about Microsoft Corp. (NASDAQ:MSFT) CEO Steve Ballmer's running mouth on Google Inc. (NASDAQ:GOOG) being a "one trick pony," it seemed a chance to review the context in which that comment was made and provide my take on it. While delivering an address to Stanford's Graduate School of Business (ironic, considering both of Google's founders graduated from there), he called the web search giant a "one trick pony" that is growing way too fast for its britches.
Fair enough -- and he has a point. Google has skyrocketed from nothing in less than ten years to where it is today, and the company is looking to grow even faster with new data centers, product offerings, media partnerships and acquisitions in the advertising world. Although I can see why Ballmer said what he did, the CEO is forgetting that innovators and newcomers can disrupt a level playing field and turn entire industries on their heads.
It can be argued that Google has done that (to a point). Google has won the internet search war -- and Yahoo! Inc. (NASDAQ:YHOO) and Microsoft can compete but will probably never be able to overtake Google. In a case of "too little, too late," the software giant has many solid businesses, but it lost this one.
If Ballmer is right and Google is growing too fast to manage itself -- playing in too many sandboxes -- it sure does not seem that way. Google, in my opinion, wants to get information about anything to anyone through any medium necessary -- while connecting buyer and seller and making money on each transaction to feed its coffers. Is that so big a task? It's huge.
In what may be a savvy move by Microsoft's (NASDAQ:MSFT) CEO, Steve Ballmer, investor reaction has been quick and decisive. The stock is down 2% from Ballmer's comment to the analytical world----slow down on your Vista expectations.
Microsoft, which has under-performed these past four years, finally has a chance for sustainable double digit growth. There was no way Ballmer was going to allow the analytical community to run in front and let Vista numbers get to far ahead of themselves.
In the heyday of huge annual growth numbers, MSFT was always superb at throwing cold water on crazy forecasts. They would just blow away a quarterly expectation, beating all estimates and Wall Street would get all hyped-up. Then Bill Gates and Steve Ballmer would in their bashful, reticent way explain that investors cannot expect these type of results going forward. Then of course, they would blow away the next quarter again and again. That was then, this is now.
Steve Ballmer knows he finally has a hot hand with Vista. After the early adopters and techies who "gotta have the newest thing" install Vista, then comes the masses. The masses take longer to buy, but the consistency will be where Microsoft's bread will be buttered. This company can finally start enjoying double digit growth numbers again---at least for awhile.
Georges Yared is the author of "Baby Boomer Investing...Where do we go from here?" and "Stop Losing Money Today". For more info on both books go to http://www.georgesyared.com
The Wall Street Journal's (subscription required) "Heard on the Street" column focused on Credit Suisse Group's (NYSE: CS) new CEO, Brady Dougan, saying the company chose him to hold a steady course, avoiding periods of high revenues followed by crashes.
Barron's Online's (subscription required) "Weekday Trader" column wrote that Elizabeth Arden Inc (NASDAQ: RDEN) trades at a discount to its industry and the broader market, and looks enticing at current levels.
OTHER PAPERS:
BusinessWeek's"Inside Wall Street" column reported that AMR Corporation (NYSE: AMR), the parent of American Airlines, is a buyout target of a group that includes the Goldman Sachs Group Inc (NYSE: GS).
The New York Times reported that Congress has reintroduced legislation to allow the federal government to further regulate the tobacco industry by cracking down on marketing aimed at young people.
The New York Times also reported that Microsoft Corporation's (NASDAQ: MSFT) CEO Steve Ballmer said Wall Street analysts are being too optimistic about sales of Windows Vista.
According to the Red Herring, Google Inc (NASDAQ: GOOG) has acquired Adscape for $23 million.
Every time we write a critical post about Time Warner or Microsoft, or expose a negative fact, rumor or analysis, the refrain renews: fire the CEO! Dick Parsons, that lucky guy, gets the brunt of our readers' anger. He's screwing up Time Warner, you've told us time and time again, he should go. So say you of Microsoft's Steve Ballmer, he of the explosive personality, sweaty armpits, and billions in inexplicable operating expenses. Sometimes it's Jeff Immelt of GE, or even well-loved figures like Meg Whitman of eBay.
It's nothing new, but it's worth evaluating her reasons for the radical battle cry. She argues that Parsons is all about politics (in fact, he's rumored to be angling for a 2009 run for New York City mayor), a skill that helped him avoid perishing in the "shark tank" that has been Time Warner's boardroom for the past decade and earned him credit as being a "Teflon Don," but has failed miserably to maintain Time Warner's legacy as a creative, entrepreneurial culture where good managers were rewarded "generous financial incentives for producing solid earnings growth." Fire Parsons, she says, and maybe that creative culture can be revived.
I honor her passion, and agree that the creative, entrepreneurial company always wins over the political shark tank. But who, Joan, is positioned to take the helm from him? That question must be answered before anyone brings out a block and starts chopping.
Microsoft CEO Steve Ballmer can't get no love. His famous "monkey boy" performance is crazy-popular among those who thrive on poking fun at (and re-mixing) Ballmer's sweaty antics. He's being marginalized as Ray Ozzie and Craig Mundie are groomed to replace Gates (and, we imagine, Ballmer as well) -- and reporters and analysts are jostling to get past him and talk to Ozzie, who everyone seems to adore.
In conjunction with the mag's "50 Who Matter Now" list (featuring Ray Ozzie and competitive leaders Steve Jobs, Larry Page and Sergey Brin, and worst of all for Ballmer's ego, Bill Gates himself), Ballmer headlines the "10 People Who Don't Matter" segment. "Let's face it: The head of the world's biggest software company is a lame duck," the judgment begins.
A lame duck who decides what happens with billions of investors' -- of your -- cash. Somehow, that's not very comforting.
What is Microsoft's largest challenge these days? Google? Yahoo!? Open-source software? Its own fumblings? All of those partially contribute to the equation. But the larger picture says that Microsoft's ability to grow, using any and all methods that can sustain the company long-term, is its biggest challenge. So, how does old Softie go about growing? That is the billion-dollar question.
Does Bill Gates' recent decision to leave day-to-day responsibilities at Microsoft reflect that he knows growth from a well-planned changing of the guard is needed? Probably so. Blogging Stocks' Peter Cohan's post paints a good view of what is coming to Microsoft if it wants to reward itself and shareholders by ensuring growth and the most cohesive corporate strategy comes to fruition -- perhaps it can survive better and compete at the needed pace by divesting itself into separate entities.
It's odd that a seemingly-simple information conduit like the web browser could turn out to be Microsoft's greatest fear -- how can it grow to bypass the need for equitable and freely-accessible information and applications that live on the web and not on the PC? Sun Microsystems' former CEO Scott McNealy, although chided constantly at the company he founded for not growing at a rapid pace like the competition, was quite prophetic years ago by proclaiming that "the network is the computer."
This is a mantra that current CEO Jonathan Schwartz still trumpets to this day. Perhaps McNealy will get the last laugh over Bill Gates after all -- or maybe not. Microsoft doesn't want this network computing consumer trajectory just yet. That is, not until it can develop and deliver an infrastructure to compete on that layer -- something Google just can't stop doing. Ray Ozzie has a monumental task ahead.
Yesterday I liveblogged the speech given by Microsoft CEO Steve Ballmer at the Sanford C. Bernstein Strategic Decisions Conference, and if you read that, you already know: Microsoft is planning to keep investing significant dollars in operating expense, despite the shock-and-awe felt by the Street.
But now that the transcript's available on Microsoft's web site, I'd like to point you to a couple of Ballmer's justifications for this expense. He says that it's important to be on the front end of innovation (not exactly the place Microsoft's been known to be these last several years) and that the hardest decision was, what to invest in? "
When I first talked to Bill Gates about this and some of our other senior technology guys, Ray Ozzie, they came back with a list of, I don't know, 70 things. I said, Bill, you can't have a list of 70 things. He said, but there's 70 things, Steve. And I said, you've got to pare it down. He said, no ... with an R&D budget that's going to come on $7 billion, we could probably afford to do 60 or 70 different things."
What are those 70 things, though? The one thing he talked about most: obliterating paper. You heard me right. Steve Ballmer told the investors gathered at his talk, "I look in this audience, and I see a lot of paper and pencil. Ten years from now, I won't see paper and pencil if we in the hardware industry do our jobs right. Pencil and paper will be replaced by superior technology that is digital." If he has anything to do with it, it will be Microsoft that profits from the death of paper and pencil.
Can you hear us, Steve Ballmer? Can you hear us now?
The answer to the question (asked by analysts across Wall Street, on behalf of the millions of Microsoft shareholders they purport to represent) has been a resounding no. But Ballmer is trying to change all that. Tomorrow morning he heads to New York to present at the Sanford C. Bernstein & Co. Strategic Decisions Conference (Strategic Decision #1: presenting at the conference), at 8 a.m., bright and early. Says Michael Holland, fund manager and MSFT shareholder for more than a decade: "What I want to hear is how much he listens." As Ballmer is known for listening with a huge chip on his shoulder, this should be interesting.
Says David Hunter: "This may be a cross cultural experience for all involved." It will be the first time Ballmer has done anything of this kind, and he'll be repeating his performance in Boston on Thursday. We'll be blogging the webcast live.
Last week Microsoft's Bill Gates expressed regret about being the world's richest man. When I read this, I was reminded of the expression, "be careful what you wish for, you might get it."
Before launching into an analysis of how Gates could be toppled from his throne, it's worth noting that I've admired Microsoft and wondered whether it's lost its elbow room. I praised Microsoft's ability to adapt to change in two of my books, The Technology Leaders and Value Leadership. But in the last several years, Microsoft seems to have lost its mojo as I noted in these interviews by Red Herring and The Washington Post.
Here's a surprise. The biggest threat to Gates's top rank on the Forbes 400 comes not from the number two on the list, but from numbers 15 and 16. According to that September 2005 list, Gates's net worth totaled $51 billion. Berkshire Hathaway's Warren Buffett came in second at $49 billion. And he was followed by Microsoft co-founder Paul Allen ($22.5B), Dell's Michael Dell ($18B) and Oracle's Larry Ellison ($17B). Spots six through 12 were occupied by descendants of Wal-Mart founder Sam Walton, Microsoft CEO, Steve Ballmer, and heiresses from Cox Enterprises and Fidelity.
Why aren't you firing more people? asked Microsoft CEO Steve Ballmer of British managers during the
Institute of Director's conference yesterday, the London Times reports. After all,
he himself makes a policy to dismiss 6.5% of his employees every year. And when in doubt? Fire twice as
many.
It's not whether they're doing a good job, he says: it's all about whether you can find better people.
Critics are naturally saying that this strategy will create a "culture of fear." And, bizarrely,
his comments came immediately after Cadbury Schweppes CEO Todd Stitzer was bemoaning a "serious image
problem" in which businesses were seen as heartless capitalists. Not as heartless as U.S. business I suppose!
I just hope Ballmer doesn't apply this strategy to his marriage. "Sorry, Mrs. Balmer! It's not that you're
a bad wife. It's just... the lady I met in tango class is so much better."
Every time we write a critical post about Time Warner or Microsoft, or expose a negative fact, rumor or analysis, the refrain renews: fire the CEO! 
It's nothing new, but it's worth evaluating her reasons for the radical battle cry. She argues that Parsons is all about politics (in fact, he's rumored to be angling for a 2009 run for New York City mayor), a skill that helped him avoid perishing in the "shark tank" that has been Time Warner's boardroom for the past decade and earned him credit as being a "Teflon Don," but has failed miserably to maintain Time Warner's legacy as a creative, entrepreneurial culture where good managers were rewarded "generous financial incentives for producing solid earnings growth." Fire Parsons, she says, and maybe that creative culture can be revived.
Microsoft CEO Steve Ballmer can't get no love. His 
Why aren't you firing more people? asked Microsoft CEO Steve Ballmer of British managers during the
Institute of Director's conference yesterday, the 
Big 3 CEOs drive to Washington to suck up to Congress
GM and Ford ready weak pitches for taxpayer bucks
Cramer on BloggingStocks: A troika of opportunity and trouble 
