Potential Acquisition of Yahoo by Microsoft

1. Potential Acquisition of Yahoo by Microsoft Perspective Analysis By: Chih-Yang Hung, chung@alliant.edu Lindsy Brophy, lbrophy@alliant.edu Mike Thornton, thornton@sejpa.org Selma Salim, ssalim@alliant.edu ALLIANT INTERNATIONAL UNIVERSITY STRATEGIC MANAGEMENT BUS6020 - Spring Semester 2010 YAHOO TEAM Instructor: Mike Vescuso, PhD

2. ALLIANT INTERNATIONAL UNIVERSITY BU6020 – SP 2010 Agenda • Yahoo Corporative, Business & Functional Overview • Yahoo Acquisition's Value for Microsoft: • Marketing Perspective • Corporative & Business Perspective • Engineers Perspective • Negotiation Status • Yahoo Team's Analysis & Conclusion • Yahoo Corporative, Business & Functional Overview • Yahoo Acquisition's Value for Microsoft: • Marketing Perspective • Corporative & Business Perspective • Engineers Perspective • Negotiation Status • Yahoo Team's Analysis & Conclusion Speaker: Selma Salim

3. Yahoo Corporative, Business & Functional Overview • Yahoo Acquisition's Value for Microsoft: • Marketing Perspective • Corporative & Business Perspective • Engineers Perspective • Negotiation Status • Yahoo Team's Analysis & Conclusion Finance Perspective Yahoo! generates revenues by providing marketing services to advertisers across a majority of Yahoo! Properties and Affiliate sites. Additionally, although many of its user services are free, Yahoo! does charge for a range of premium services that it offers. Internal Process Perspective Costumer Perspective • Respect between each other. • Communicate openly. • Collaboration while maintain individual accountability. • Encourage the best ideas that coming from anywhere. • Appreciate the value of multiple perspectives and diverse expertise • Respect the costumers above all else. • Yahoo is a costmer’s choice. • Maintain custumers’ loyalty and trust. • Listen and respond costumers. • Seek to exceed their expectation Learning & Innovation Perspective Thrive on creativity and ingenuity. Seek the innovations and ideas that can change the world. Anticipate market trends and move quickly to embrace them. Don’t afraid to take informed, responsible risk. ALLIANT INTERNATIONAL UNIVERSITY BU6020 – SP 2010 Yahoo Corporative, Business & Functional Overview Founded in 1994 by Stanford Ph.D. students: David Filo and Jerry Yang Yahoo's Mission: “To connect people to their passions, communities, and the world’s knowledge.” Marketing Strategy: its functions are brand, audience, business to business and regional marketing. Target Marketing: Innovators and Self-Expression (Individuals and Business) Business Strategy: provides Internet services to users, advertisers, publishers, and developers worldwide. Speaker: Selma Salim

4. Yahoo Corporative, Business & Functional Overview • Yahoo Acquisition's Value for Microsoft: • Marketing Perspective • Corporative & Business Perspective • Engineers Perspective • Negotiation Status • Yahoo Team's Analysis & Conclusion ALLIANT INTERNATIONAL UNIVERSITY BU6020 – SP 2010 Yahoo Corporative, Business & Functional Overview What do you think about?.... No Comment Agree YAHOO + Microsoft could compete with Google YAHOO would continuing losing market and eventually disappear if it doesn’t accept the acquisition YAHOO could compete with Google by itself if it changes the strategy “help people and businesses throughout the world realize their full potential” “connect people to their passions, communities, and the world’s knowledge” “organize the world’s information and make it universally accessible and useful” Speaker: Selma Salim

5. Yahoo Corporative, Business & Functional Overview • Yahoo Acquisition's Value for Microsoft: • Marketing Perspective • Corporative & Business Perspective • Engineers Perspective • Negotiation Status • Yahoo Team's Analysis & Conclusion Why does want to acquire ALLIANT INTERNATIONAL UNIVERSITY BU6020 – SP 2010 YahooAcquisition's Value for Microsoft Speaker: Selma Salim

6. Yahoo Corporative, Business & Functional Overview • Yahoo Acquisition's Value for Microsoft: • Marketing Perspective • Corporative & Business Perspective • Engineers Perspective • Negotiation Status • Yahoo Team's Analysis & Conclusion ALLIANT INTERNATIONAL UNIVERSITY BU6020 – SP 2010 YahooAcquisition's Value for Microsoft • Yahoo Acquisition's Value for Microsoft: • Marketing Perspective • Corporative & Business Perspective • Engineers Perspective Speaker: Selma Salim

7. Yahoo Corporative, Business & Functional Overview • Yahoo Acquisition's Value for Microsoft: • Marketing Perspective • Corporative & Business Perspective • Engineers Perspective • Negotiation Status • Yahoo Team's Analysis & Conclusion ALLIANT INTERNATIONAL UNIVERSITY BU6020 – SP 2010 YahooAcquisition's Value for Microsoft • Yahoo Acquisition's Value for Microsoft: • Marketing Perspective • Corporative & Business Perspective • Engineers Perspective Speaker: Selma Salim

8. Yahoo Corporative, Business & Functional Overview • Yahoo Acquisition's Value for Microsoft: • Marketing Perspective • Corporative & Business Perspective • Engineers Perspective • Negotiation Status • Yahoo Team's Analysis & Conclusion ALLIANT INTERNATIONAL UNIVERSITY BU6020 – SP 2010 YahooAcquisition's Value : Marketing Perspective Speaker: Lindsy Brophy

9. Yahoo Corporative, Business & Functional Overview • Yahoo Acquisition's Value for Microsoft: • Marketing Perspective • Corporative & Business Perspective • Engineers Perspective • Negotiation Status • Yahoo Team's Analysis & Conclusion ALLIANT INTERNATIONAL UNIVERSITY BU6020 – SP 2010 YahooAcquisition's Value : Marketing Perspective • Marketing Functions: Brand, audience, business to business and regional marketing • Yahoo! is Leading global brand that changed the way people communicate with each other, conduct transactions and access, share, and create information. Today, Yahoo! Inc. attracts hundreds of millions of users every month through its innovative technology and engaging content and services, making it one of the most trafficked Internet destinations and a world class online media company with a presence in more than 25 countries, provinces, and territories. • Yahoo! has brand leverage: one of user-friendliness. Amazing brand recognition and loyalty. This is why they decided to charge for inclusion into its directory and made some more money. It acquired other properties online, including Geocities and eGroups. Speaker: Lindsy Brophy

10. Yahoo Corporative, Business & Functional Overview • Yahoo Acquisition's Value for Microsoft: • Marketing Perspective • Corporative & Business Perspective • Engineers Perspective • Negotiation Status • Yahoo Team's Analysis & Conclusion ALLIANT INTERNATIONAL UNIVERSITY BU6020 – SP 2010 YahooAcquisition's Value : Marketing Perspective Challenges • Yahoo! looks decidedly passé and Google is setting the standard on the internet, both as a virtual brand and an online hot property. • Yahoo! Wants to change its image as the “also-ran” search engine. • Working on a massive plan to overhaul its brand in order to repair a damaged public image and focus consumers on what defines Yahoo!. Speaker: Lindsy Brophy

11. Yahoo Corporative, Business & Functional Overview • Yahoo Acquisition's Value for Microsoft: • Marketing Perspective • Corporative & Business Perspective • Engineers Perspective • Negotiation Status • Yahoo Team's Analysis & Conclusion ALLIANT INTERNATIONAL UNIVERSITY BU6020 – SP 2010 YahooAcquisition's Value : Marketing Perspective Future outlook: • Yahoo! Is taking steps to play catch-up in the social networking arena by expanding it with Twitter and integrating micro blogging services throughout website relationship. • “We want to integrate across all social networks to give consumers a better experience,” said Cody Simms, senior director of product management for Yahoo’s open strategy, in an interview yesterday. “Yahoo then becomes a network of social networks, making it easier for users.” • And that effort to make Yahoo the one place to gather it all is just what it seems to be trying to do. In December, Yahoo announced it would integrate Facebook Connect with its many properties–from its powerful media sites to its Flickr photo service to its email. Speaker: Lindsy Brophy

12. Yahoo Corporative, Business & Functional Overview • Yahoo Acquisition's Value for Microsoft: • Marketing Perspective • Corporative & Business Perspective • Engineers Perspective • Negotiation Status • Yahoo Team's Analysis & Conclusion ALLIANT INTERNATIONAL UNIVERSITY BU6020 – SP 2010 YahooAcquisition's Value : Marketing Perspective Future outlook: • In addition, Yahoo said that search and media properties “like News, Finance, Entertainment, and Sports will include real-time public Twitter updates across a variety of topics.” • The company would be striking similar deals with other social networking sites, and MySpace and LinkedIn are likely candidates for the next two spots on Yahoo’s social monument. • This kind of search and presentation improvement is key, of course, as Yahoo must present a more innovative palette of tools to consumers as Microsoft (MSFT) takes over its search technology and others offer users an increasing number of features. Speaker: Lindsy Brophy

13. Yahoo Corporative, Business & Functional Overview • Yahoo Acquisition's Value for Microsoft: • Marketing Perspective • Corporative & Business Perspective • Engineers Perspective • Negotiation Status • Yahoo Team's Analysis & Conclusion ALLIANT INTERNATIONAL UNIVERSITY BU6020 – SP 2010 YahooAcquisition's Value : Corp. & Business Perspective Speaker: Mike Thornton

14. Yahoo Corporative, Business & Functional Overview • Yahoo Acquisition's Value for Microsoft: • Marketing Perspective • Corporative & Business Perspective • Engineers Perspective • Negotiation Status • Yahoo Team's Analysis & Conclusion ALLIANT INTERNATIONAL UNIVERSITY BU6020 – SP 2010 YahooAcquisition's Value : Corp. & Business Perspective Why Yahoo! is attractive to Microsoft… • Strong revenue stream with good profit margins from internet advertising. • More than 350 million users. • Strong brand recognition (some say it’s the most popular website in the world). • Strong international presence (especially in Asia, which has great market potential). • Combined with Microsoft, Yahoo-MSN could make a formidable opponent to Google in the search market According to figures from Web traffic tracking firm comScore, Yahoo-MSN combined had 38.4 percent of the search market in the U.S. in March. Google led the market with a 48.3 percent share. Speaker: Mike Thornton

15. Yahoo Corporative, Business & Functional Overview • Yahoo Acquisition's Value for Microsoft: • Marketing Perspective • Corporative & Business Perspective • Engineers Perspective • Negotiation Status • Yahoo Team's Analysis & Conclusion ALLIANT INTERNATIONAL UNIVERSITY BU6020 – SP 2010 YahooAcquisition's Value : Corp. & Business Perspective Microsoft has struggled to make inroads in the rapidly growing online advertising business. The company's MSN division ranks a distant third to Google and Yahoo in the online search market. In 2007, Microsoft reported that revenues at its online division grew only 10 percent, below the industry average, and that the unit posted an operating loss of $200 million "Microsoft is at a crossroads. For them, rather than spend just hundreds of millions in the hopes of being more competitive with Google, buying Yahoo evens the playing field in one fell swoop," Jacob said. "And for Yahoo, over time they will have an even more difficult time competing against both Google and Microsoft and I think that's becoming more clear to them." Speaker: Mike Thornton

16. Yahoo Corporative, Business & Functional Overview • Yahoo Acquisition's Value for Microsoft: • Marketing Perspective • Corporative & Business Perspective • Engineers Perspective • Negotiation Status • Yahoo Team's Analysis & Conclusion ALLIANT INTERNATIONAL UNIVERSITY BU6020 – SP 2010 YahooAcquisition's Value : Corp. & Business Perspective Speaker: Mike Thornton

17. Yahoo Corporative, Business & Functional Overview • Yahoo Acquisition's Value for Microsoft: • Marketing Perspective • Corporative & Business Perspective • Engineers Perspective • Negotiation Status • Yahoo Team's Analysis & Conclusion ALLIANT INTERNATIONAL UNIVERSITY BU6020 – SP 2010 YahooAcquisition's Value : Engineers Perspective Speaker: Chih-Yang Hung

18. Yahoo Corporative, Business & Functional Overview • Yahoo Acquisition's Value for Microsoft: • Marketing Perspective • Corporative & Business Perspective • Engineers Perspective • Negotiation Status • Yahoo Team's Analysis & Conclusion Ranked #1 in Worldwide Websites Ranked #1 in Worldwide Websites ALLIANT INTERNATIONAL UNIVERSITY BU6020 – SP 2010 YahooAcquisition's Value : Engineers Perspective • Personalized content and search options. Chat rooms, free e-mail, clubs, and pager. • Avg. Review for yahoo.com:Traffic Rank for yahoo.com: 1 Speaker: Chih-Yang Hung

19. Yahoo Corporative, Business & Functional Overview • Yahoo Acquisition's Value for Microsoft: • Marketing Perspective • Corporative & Business Perspective • Engineers Perspective • Negotiation Status • Yahoo Team's Analysis & Conclusion ALLIANT INTERNATIONAL UNIVERSITY BU6020 – SP 2010 YahooAcquisition's Value : Engineers Perspective Great Advantage On International • 270 million page viewers per month. • 54 million members • 72 million mail users. • Keeping the highest rates of homepage for 3 years. • 20 properties among top 3 in category. • NO.1 brand in internet. • About 2 hours per week of using per user Speaker: Chih-Yang Hung

20. Yahoo Corporative, Business & Functional Overview • Yahoo Acquisition's Value for Microsoft: • Marketing Perspective • Corporative & Business Perspective • Engineers Perspective • Negotiation Status • Yahoo Team's Analysis & Conclusion ALLIANT INTERNATIONAL UNIVERSITY BU6020 – SP 2010 YahooAcquisition's Value : Engineers Perspective Multiple functionally • Search engine • News • Stocks • Knowledge • Auction • Life • Shopping • Blog • Mail • Buisness Speaker: Chih-Yang Hung

21. Yahoo Corporative, Business & Functional Overview • Yahoo Acquisition's Value for Microsoft: • Marketing Perspective • Corporative & Business Perspective • Engineers Perspective • Negotiation Status • Yahoo Team's Analysis & Conclusion Shopping News Knowledge Greater than ebay in Taiwan ALLIANT INTERNATIONAL UNIVERSITY BU6020 – SP 2010 YahooAcquisition's Value : Engineers Perspective Speaker: Chih-Yang Hung

22. ALLIANT INTERNATIONAL UNIVERSITY BU6020 – SP 2010 Negotiation Status • Yahoo Corporative, Business & Functional Overview • Yahoo Acquisition's Value for Microsoft: • Marketing Perspective • Corporative & Business Perspective • Engineers Perspective • Negotiation Status • Yahoo Team's Analysis & Conclusion Feb. 1, 2007. After two years of talks and speculation, Microsoft makes unsolicited offer to buy Yahoo for $31 per share, or $44.6 billion. Feb. 11, 2007. Yahoo rejects Microsoft’s offer. “substantially undervalues” Feb. 19, 2007. Gates tells The Associated Press the software maker isn’t in talks with Yahoo about raising its offer. March 5, 2007. Yahoo extends a deadline for nominating candidates to its board, buying time to strike an alternative deal. Yahoo is said to be in talks with Google Inc., News Corp.’s MySpace.com and Time Warner Inc.’s AOL. Speaker: Mike Thornton

23. ALLIANT INTERNATIONAL UNIVERSITY BU6020 – SP 2010 Negotiation Status • Yahoo Corporative, Business & Functional Overview • Yahoo Acquisition's Value for Microsoft: • Marketing Perspective • Corporative & Business Perspective • Engineers Perspective • Negotiation Status • Yahoo Team's Analysis & Conclusion March 18, 2007. Yahoo releases optimistic revenue forecast for next two years to justify rejecting bid. April 5, 2007. Microsoft CEO Steve Ballmer gives Yahoo three weeks to agree on a buyout or expect the software maker to go hostile (and potentially lower the offer price). April 9, 2007. Yahoo says it will try using Google’s search ad engine instead of its own in a limited test. Microsoft’s general counsel, Brad Smith, raises antitrust concerns. April 26, 2007. Microsoft deadline for Yahoo to accept the offer expires. Both companies remain silent. Speaker: Mike Thornton

24. ALLIANT INTERNATIONAL UNIVERSITY BU6020 – SP 2010 Negotiation Status • Yahoo Corporative, Business & Functional Overview • Yahoo Acquisition's Value for Microsoft: • Marketing Perspective • Corporative & Business Perspective • Engineers Perspective • Negotiation Status • Yahoo Team's Analysis & Conclusion May 1, 2007. Ballmer tells Microsoft employees that he “won’t go a dime above” what he thinks Yahoo is worth, and that he is willing to walk away from the deal. May 3, 2007. Microsoft withdraws its offer after raising its bid by $5 billion to $33 per share. Yang demands at least $37 per share, an additional $5 billion. ACTUALLY…. Feb 22, 2010. Microsoft has won unconditional European Union approval to buy Yahoo's internet search engine. Speaker: Mike Thornton

25. ALLIANT INTERNATIONAL UNIVERSITY BU6020 – SP 2010 Yahoo Team’s Analysis & Conclusion • Yahoo Corporative, Business & Functional Overview • Yahoo Acquisition's Value for Microsoft: • Marketing Perspective • Corporative & Business Perspective • Engineers Perspective • Negotiation Status • Yahoo Team's Analysis & Conclusion • Merging Yahoo-MSN as a search provider would make them a strong second to Google.  Also, by increasing search volume, Yahoo could leverage this into more advertising revenue (which looks to be their most successful part of their business). • There are major cultural and technology differences between Yahoo and Microsoft that would complicate integration and make retention bonuses more necessary. • In the past decade YAHOO! has invested heavily to build the bran and focused on scales while Google has dedicated innovation. Now Microsoft is doing the same YAHOO!’s mistake. “…Not one of these acquisitions managed to alter Yahoo's long, slow slide into profound strategy decay - if anything, they only accelerated Yahoo's decline…” “Microsoft's battle for Yahoo is a case of asymmetrical competition in reverse: Microsoft is competing on yesterday's terms. Instead of using new DNA to revolutionize deeply troubled media and technology industries, Microsoft is simply buying more resources to plug into yesterday's DNA…” Umair Haque’s blog. July 8, 2008   Speaker: Selma Salim

26. ALLIANT INTERNATIONAL UNIVERSITY BU6020 – SP 2010 Thanks for your attention Feel free to express your questions and/or comments…. What is your best bet? $50 millions Class’ bet $ YAHOO! Team

27. ALLIANT INTERNATIONAL UNIVERSITY BU6020 – SP 2010 References • Swisher, K. (2009, June 24). Exclusive: Yahoo Working on Major Brand Overhaul (Pretty Please, No More Yodeling!). Retrieved March 1, 2010, from AllThingsD.com: http://kara.allthingsd.com/20090624/exclusive-yahoo-working-on-major-brand-overhaul-please-no-more-yodeling/ • http://blogs.hbr.org/haque/2008/07/what_strategists_can_learn_fro.html • http://www.crunchbase.com/company/yahoo • http://finance.yahoo.com/q/pr?s=yhoo • http://manonamission.blogspot.com/2005/04/yahoos-yhoo-mission-statement-values.html • http://www.samples-help.org.uk/mission-statements/microsoft-mission-statement.htm YAHOO! Team