Release out. Microsoft’s Q4 is mostly in line with consensus – thought it missed EPS by a penny. Guidance for the next quarter is a little light. And the online business continues to underwhelm – Microsoft doubled its Q4 loss, y/y, and lost another $1.2 billion over the last year while trying to figure out the Web.
Reviewing numbers now; call at 5:30 est.
Key Metrics:
Revenue: $15.84 vs. 15.65 billion consensus, $15.5-$15.8 billion guidance
EPS: $0.46 cents vs. $0.47 consensus, $0.45-$0.48 guidance
Operating Income: $5.684 vs. $5.8-$6.2 billion guidanceQ1 Revenue Guidance: $14.7 billion – $14.9 billionvs. $15.06 billion consensus
Q1 EPS Guidance:$0.47 or $0.48 vs. $0.49 consensus2009 Revenue Guidance: $67.3 b – $68.1b vs. $67.29 billion consensus, $66.9-$68.0 billion prior guidance
2009 EPS Guidance: $2.12 to $2.18 vs. $2.16 consensus, $2.13-$2.19 prior guidance
2009 Operating Income Guidance: $26.3 billion to $26.9 billion vs. $26.7-$27.4 billion prior guidanceDivisional Revenue Breakdown (Citi Est.)
Client: $4.37 billion vs. $4.19 billion est.
Server/Tools: $3.74 billion vs. $3.67 billion est.
Online Services: $838 million vs. $949 million est.
MBD: $5.26 billion vs. $5.37 billion est.
Entertainment/Devices: $1.58 billion vs. $1.55 billion est.
SAN FRANCISCO — I.B.M. reported Thursday that its net income rose 22 percent in the second quarter to $2.77 billion, or $1.98 cents a share, from the quarter a year-ago quarter.
The company said revenue climbed 13 percent, to $26.8 billion.
The earnings were well above Wall Street’s expectations. Analysts had expected $1.82 cents a share and revenue of $25.92 billion, according to a survey of analysts by Thomson Financial…
Release out. As we feared, a miss (albeit on bottom line instead of top line).
Gross revenue and net revenue in line, EPS light. Most of EPS miss from interest income and higher G&A, which isn’t good news, but also isn’t that big a deal. Massive CAPEX once again hammered free cash flow, which has been flat for four quarters (Where on earth is all this money going?). Revenue benefitted heavily from FOREX, and certainly wasn’t the upside surprise the Street was looking for. Stock down hard in aftermarket.
Bottom line: In light of ongoing revenue deceleration and margin compression, stock multiple should continue to compress. We continue to think fair value is 25X-30X free cash flow vs. the 40X everyone has gotten used to.
(And more great news: Microsoft earnings in line, but guidance light). (Link to Google webcast).
Ed: The deal is dead. It never made sense. The conversation won’t die.
Microsoft Chairman Bill Gates told the press in Tokyo yesterday that the company “isn’t pursuing other deals following the withdrawal of its $47.5 billion takeover bid for Yahoo.” Their experience dealing with Yahoo, apparently, has put them off acquisitions altogether.
But wait. Just Monday Gates said “I wouldn’t rule out some partnerships but we don’t have anything imminent there” following a meeting and dinner with South Korean President Lee Myung-bak. In corporate-speak, that’s a pretty strong statement that Microsoft wants to buy some companies.
Did Microsoft change corporate development strategies from one day to the next? It appears they did. On Monday he says he wouldn’t rule out partnerships. Tuesday, no partnerships and a go it alone strategy.
What’s the real strategy? I can’t help but wonder if their key goal is to convince the market that they really don’t want Yahoo in order to drive their stock price down as far as possible. It’s clear that the markets still anticipate a deal with Microsoft, or possibly Google. It is currently trading at just under $26; analysts think its share price should be closer to $22.
If Gates is out telling the world, as he did on Monday, that they need to acquire other companies to fix their Internet strategy, it doesn’t take very long to figure out that there isn’t another Yahoo out there on the market. Microsoft has a long term problem on its hands, and Yahoo may be the only remedy. So when Gates says Microsoft isn’t pursuing deals, what I tranlate that to is “We really, really want to buy Yahoo.”
, CNet
Bill Gates to dealmakers: cool your heels.
With its multibillion-dollar Yahoo merger bid yanked from the table, the Microsoft chairman said in a Tokyo press conference on Wednesday that the software giant has no immediate plans to jump on another deal, according to an Associated Press report.
“At this point, Microsoft is focused on its independent strategy,” Gates said during the press conference.
The Microsoft founder recounted how the Redmond giant had spent a lot of energy on trying to wrap up a deal with Yahoo, but it ultimately decided that it was better to leave it behind.
Gates reiterated Microsoft CEO Steve Ballmer’s plan: pursue an independent path to grow the company’s search advertising and online-services business.
That Plan B, as outlined by CNET News.com’s Ina Fried, could include such things as beefing up its engineering ranks and looking at other business partnerships.
Some of those partnerships could include Facebook, in which Microsoft is already a minority investor, and MySpace.com.
Gates is the latest Microsoft executive to chime in on the software giant’s future plans. Microsoft’s Windows Live General Manager Brian Hall covered such ground Tuesday at the Merrill Lynch Technology Conference, where he addressed investors.
To: Yahoo CEO Jerry Yang Now that Yahoo appears to be on its own path, it’s time for the company to find in its past what could again make it great. Contrary to popular opinion, the key to the future isn’t becoming a technological marvel to rival Google. Instead, Yahoo should home in on what made it special before the dot-com bust: The Yahoooooo! (cowboy twang inserted) of yesteryear. Yahoo was an Internet media pioneer. The company built or bought every massively popular feature on the Web today–think Broadcast.com (video), Launch (music), and Groups (social networks). It also developed an advertising engine that could deliver on the dream campaign of any marketer with the data to back up that promise. You could argue that Yahoo failed to take advantage of many of those assets in recent years, but the shortcomings haven’t been in vision, they’ve been in execution…
Yahoo Can Find Its Way, But Only if It Stops Searching
Jerry Yang’s spin campaign about why the Microsoft bid fell through is transparent. He’s not trying to cajole Steve Ballmer back to the negotiating table; he’s trying to cover his rear and appease indignant shareholders. The only reason he’s so open about accepting a new bid from Microsoft, I think, is that he’s not expecting another one to come.
May 6, 2008 4:00 AM PDT
Memo to Jerry Yang: How to make Yahoo great again
From: Stefanie Olsen, CNET News.com
Re: Getting your company back on track
The Online Ad Story in a Picture New York Times
By SAUL HANSELL
Sometimes you see a graph that tells the whole story. The one in The Wall Street Journal this morning showing the relative share of online advertising spending of the big players is one of them. (The data, from eMarketer, is below.)
The big picture is that the online ad market is booming. But the big portals that dominated spending in the early part of the decade — AOL, Yahoo and Microsoft — are all losing share, even though all of them have been buying up advertising companies. Social networking sites and sites further out the long tail are increasing their share of audience time, and thus ad dollars.
You might say it is like the big three TV networks after cable arrived. Except for one difference: Google. No cable network arose to sop up one-third of the commercial time.
Ed: Typical conventional wisdom at the top of the world view. Where did eMarketer get data on the Long Tail of suppliers, publishers, and ad sellers?
April 10, 2008
In preparation for its upcoming conference in D.C., the Newspaper Association of America requested some preliminary data from Borrell Associates’ local online revenue study, expected in May. The NAA reported that, as found by Borrell, newspaper sites grabbed almost 27 percent of local online ad market share in ‘07, or over $2 billion in local online ad revenue. Paper sites also grabbed 26 percent of the$363 million spent on local video ads, according to the NAA’s report.
Local YP and TV sites individually accounted for just under 10 percent of the market, and radio stations around 2 percent.
September 5th, 2007
From Mashable:
“eMarketer reports that spending for online advertising has surpassed ad dollars spent on radio advertising for the first time in 2007, with online marketing reaching $21.7 billion while radio reached $20.4 billion.”
Ed: AOL, Google, Fox have joined the band of hunters circling Yahoo’s dead meat. Discussions center on my value – not integration plans to better serve users. Sad.
Microsoft/News Corp. Deal In The Works “For Days”
We hear that the Microsoft/News Corp. negotiations, firstreported by the New York Times tonight, aren’t the result of today’s Google/Yahoo news — a source tells us Rupert Murdoch and Steve Ballmer’s teams have “been on it for days, working hard”, and that Yahoo is understandably “pissed” about the attempted union.
Do the MSFT/NWS talks predate the GOOG/YHOO talks or the YHOO/TWX talks? We don’t know…
And Rupert’s interest in a NWS/MSFT/YHOO deal makes as much sense as his interest in a NWS/YHOO deal did earlier this year. Rupe has spent around $1.5 billion building up Fox Interactive Media (MySpace, IGN, Photobucket and some odds and ends) and by all accounts it’s been a heady investment. Even if FIM can’t meet the $1 billion sales goal he laid out for it last summer, it’s still likely to generate $800 – $850 million.
But if he can take FIM , plus some cash (he’s got about $3.5 billion on hand) and turn it into a 10% – 15% stake of a Yahoo/MSN/FIM combo, why wouldn’t he? Getting it done is a different matter. A source tells the NYT negotiations are “sensitive” and we imagine Rupe’s facing the same hurdles he did the last time around: Trying to convince a partner (in this case, Microsoft), that FIM is worth $6- $7 billion. But if he can get anything close, he should jump on it.
See Also: Jerry Strikes Back: Yahoo/AOL Deal May Be Announced Next Week
Google Calls Quattrone For Yahoo/Microsoft Advicefrom TechCrunch by
Google has hired boutique investment bank Qatalyst Group to provide advice on the ongoing battle between Microsoft and Yahoo.
Qatalyst Group is headed by colorful Silicon Valley investment banker Frank Quattrone, who as we noted in March has returned to the Valley after spending years in the wilderness fighting obstruction of justice charges…
Yahoo Inc. and Time Warner Inc.’s AOL are closing in on a deal to combine their Internet operations, a move aimed at thwarting MicrosoftCorp.’s effort to acquire Yahoo, people familiar with the matter said Wednesday…
News Corp., AOL Pursue Yahoo Deals
Murdoch, Microsoft
Consider Joint Bid;
Google Ad PactBy MATTHEW KARNITSCHNIG, KEVIN J. DELANEY and MERISSA MARR
Under the terms being discussed between Yahoo and Time Warner, the latter would fold its AOL unit into Yahoo and make a cash investment in return for about 20% of the combined entity, people familiar with the situation said. The deal, which wouldn’t include AOL’s dial-up access business, would value AOL at about $10 billion. As part of the deal, Yahoo would use the Time Warner cash and additional funds to buy back several billion dollars worth of its own stock at a price somewhere in the middle of the range between $30 and $40 a share, the people said.
MICROSOFT BIDS FOR YAHOOSee complete coverage of Microsoft’s bid for Yahoo, including recent blog posts on the deal and an interactive stock timeline.Yahoo is also talking to Google about outsourcing search ad sales. On Wednesday, the two companies announced a test deal around search advertising.
Microsoft kicked off the battle for Yahoo nine weeks ago with a cash-and-stock offer then valued at $44.6 billion, or $31 a share. As of Wednesday, the deal is worth $29.24 a share because Microsoft’s share price has declined. Yahoo shares closed at $27.77, up seven cents, or 0.25%, in 4 p.m. trading on the Nasdaq Stock Market Wednesday.
Posted by Dan Farber
Our CNET News team put together a visual guide to the Yahoo mating dance. It might come in handy when the Yahoo board of directors meets tomorrow to consider the various options. Most bets are still on Microsoft upping its bid to capture Yahoo.
NEWS: Microsoft Wants Yahoo
See AdEcon scorecard.
Wow! What a month.
What is the real battle? It’s the control of innovation through developers.
Amazon opens product information – what’s available, what’s popular, what customers want. Salesforce opens data about customer relations. Facebook opens data on members, friends, and interests. Microsoft, Google, and Yahoo can open the profiles for millions of email users. Substantial privacy issues aside, this trend paves the way for the glue that simplifies life.
Apple wants iPhone developers. Microsoft needs to retain legacy developers. Facebook, Google, Myspace, Yahoo, Amazon, Adobe … each wants the mindshare to be the leader among developers. Each has the cash flow to delay monetization. The winner controls the innovation that fuels growth for years to come.
