CEOWORLD Magazine » Steve Ballmer

Google rivals plot: Yahoo, Microsoft in Talks of Major Search and advertising partnership

Amarendra Bhushan — Sun, 12 Apr 2009 15:14:23 +0000

Microsoft and Yahoo! are back in talks over a possible Search and advertising partnership to forge a partnership in the online world.

After a failed takeover bid by Microsoft followed by the exit of Yahoo! Inc. CEO, Jerry Yang the two parties are reportedly in talks over a possible advertising partnership.

The talks apparently included a face-to-face meeting last week between Yahoo! chief executive Carol Bartz and Microsoft’s CEO Steve Ballmer, All Things Digital’s Kara Swisher reported on her blog BoomTown.

The generally well-informed Swisher, citing “sources with knowledge of the situation,” described the talks as “preliminary” and “focused on what kinds of commercial relationship Yahoo and Microsoft could have in the future.”

Amid media reports, Microsoft CEO Steve Ballmer met Yahoo! Inc. CEO Carol Bartz to discuss a potential partnership on advertising and internet search. However, the talks did not consist of any acquisition bids on Sunnyvale, the California-based Yahoo.

Last year, Yahoo turned down a $47 billion offer that Microsoft made to takeover the Web search portal, but with Carol Bartz at the helm, Yahoo is beginning to look different. The former Amazon.com CEO is already implementing several changes in the company’s structure, but one thing she won’t do: sell Yahoo’s search business. That’s a fact she strongly stated. However, a Microsoft-Yahoo deal under which Microsoft would sell search ads for Yahoo, and Yahoo, in turn, would sell display ads on Microsoft properties, isn’t a thing you throw away before taking a very close look at.

Microsoft has been making efforts to catch up with Google in the Web search market or at least show sings that it has the capability. The software giant even hired top search execs and engineers that left Yahoo such as Qi Lu, a well-known technologist who is now president of Microsoft’s Online Services Group. Nevertheless, without the Web search volume only Yahoo can provide, all efforts seem to be in vain. Currently, in terms of audience and base of advertisers Google is incomparably higher than Microsoft.

The deal, if it goes through, may see Microsoft selling Yahoo’s search ads while Yahoo may be seen managing Microsoft’s display ads.

Among the possibilities highlighted by Swisher:

* Yahoo takes over Microsoft’s display and premium ads and Microsoft runs search advertising;

* That joint operating agreement of sorts would create a bundle to compete with Google;

* Microsoft buys Yahoo’s search business.

In a bid to merge online resources to effectively battle internet giant Google that rules more than 60 per cent of the US online search market, Microsoft had offered $44.6 billion for the acquisition of Yahoo in February 2008.

However, as Yang refused the bid saying that the “proposal is not in the best interests of Yahoo! Inc. and its stockholders”, it irked many shareholder groups including billionaire investor Carl Icahn. This also resulted in stepping down of Yahho’s co-founder Yang from the position of CEO.

Later, the Yahoo board appointed Carol Bartz as CEO after her successful stint at Autodesk.

Both Yahoo and Microsoft declined to comment on the talks. But Ballmer had expressed an interesting in resuming talks about a search deal with Yahoo since Bartz replaced Jerry Yang as the Web portal’s CEO in January.

Microsoft is preparing to relaunch its search engine, under the working name Kumo, this summer. Working on the project are a number of former Yahoo executives and technologists including Qi Lu, who now heads Microsoft’s overall online efforts.

By joining forces, Yahoo and Microsoft could potentially pose a more serious challenge to Google, which controls about two-thirds of the search market. The resumption of talks between the two companies was first reported by the D: All Things Digital bloghttp://kara.allthingsd.com/20090410/yahoos-bartz-and-microsofts-ballmer-finally-talking-about-search-and-advertising-partnership/ Friday.

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The Steve Ballmer Game: Microsoft to cut 5,000 jobs- huge hit for Seattle.

Amarendra Bhushan — Thu, 22 Jan 2009 15:31:14 +0000

Microsoft Corp. said Thursday it is cutting 5,000 jobs over the next 18 months, a sign of how badly even the biggest and richest companies are being stung by the recession. I would like to know – what percentage of these jobs is management? Bad management decisions for products that people don’t like: Vista & the current Version of Office. Or are they going to fire the front line people – doing a good job, then getting fired for bad management decisions?

This is one more huge hit for Seattle!

The layoffs appear to be a first for Microsoft, which was founded in 1975, aside from relatively limited staff cuts the software company made after acquiring companies.

The company announced the cuts as it reported an 11 percent drop in second-quarter profit, which fell short of Wall Street’s expectations. Microsoft shares plunged 7 percent in morning trading.

Microsoft said it was being hurt by deteriorating global economic conditions and lower revenue from software for PCs. The holiday quarter of 2008 was the worst the PC market had seen in several years.

The Redmond-based company said profit fell to $4.17 billion, or 47 cents per share, from year-ago earnings of $4.71 billion, or 50 cents per share.

Total revenue edged up 2 percent to $16.63 billion, as software for corporate computer servers helped offset an 8 percent drop in revenue for PC software.

The results missed Wall Street’s forecast for earnings of 49 cents per share on sales of $17.08 billion.

Microsoft said the job cuts will reduce operating costs by $1.5 billion as it prepares for lower revenue and earnings in the second half of the year. The company says it is unable to offer profit and revenue guidance for the rest of the year, because of the market volatility.

Here is the full memo to employees from Microsoft CEO Steve Ballmer about the 5,000 layoffs:

From: Steve Ballmer
To: All Microsoft FTE
Subject: Realigning Resources and Reducing Costs

In response to the realities of a deteriorating economy, we’re taking important steps to realign Microsoft’s business. I want to tell you about what we’re doing and why.

Today we announced second quarter revenue of $16.6 billion. This number is an increase of just 2 percent compared with the second quarter of last year and it is approximately $900 million below our earlier expectations.

The fact that we are growing at all during the worst recession in two generations reflects our strong business fundamentals and is a testament to your hard work. Our products provide great value to our customers. Our financial position is solid. We have made long-term investments that continue to pay off.

But it is also clear that we are not immune to the effects of the economy. Consumers and businesses have reined in spending, which is affecting PC shipments and IT expenditures.

Our response to this environment must combine a commitment to long-term investments in innovation with prompt action to reduce our costs.

During the second quarter we started down the right path. As the economy deteriorated, we acted quickly. As a result, we reduced operating expenses during the quarter by $600 million. I appreciate the agility you have shown in enabling us to achieve this result.

Now we need to do more. We must make adjustments to ensure that our investments are tightly aligned with current and future revenue opportunities. The current environment requires that we continue to increase our efficiency.

As part of the process of adjustments, we will eliminate up to 5,000 positions in R&D, marketing, sales, finance, LCA, HR, and IT over the next 18 months, of which 1,400 will occur today. We’ll also open new positions to support key investment areas during this same period of time. Our net headcount in these functions will decline by 2,000 to 3,000 over the next 18 months. In addition, our workforce in support, consulting, operations, billing, manufacturing, and data center operations will continue to change in direct response to customer needs.

Our leaders all have specific goals to manage costs prudently and thoughtfully. They have the flexibility to adjust the size of their teams so they are appropriately matched to revenue potential, to add headcount where they need to increase investments in order to ensure future success, and to drive efficiency.

To increase efficiency, we’re taking a series of aggressive steps. We’ll cut travel expenditures 20 percent and make significant reductions in spending on vendors and contingent staff. We’ve scaled back Puget Sound campus expansion and reduced marketing budgets. We’ll also reduce costs by eliminating merit increases for FY10 that would have taken effect in September of this calendar year.

Each of these steps will be difficult. Our priority remains doing right by our customers and our employees. For employees who are directly affected, I know this will be a difficult time for you and I want to assure you that we will provide help and support during this transition. We have established an outplacement center in the Puget Sound region and we’ll provide outplacement services in many other locations to help you find new jobs. Some of you may find jobs internally. For those who don’t, we will also offer severance pay and other benefits.

The decision to eliminate jobs is a very difficult one. Our people are the foundation of everything we have achieved and we place the highest value on the commitment and hard work that you have dedicated to building this company. But we believe these job eliminations are crucial to our ability to adjust the company’s cost structure so that we have the resources to drive future profitable growth.

I encourage you to attend tomorrow’s Town Hall at 9am PST in Café 34 or watch the webcast.

While this is the most challenging economic climate we have ever faced, I want to reiterate my confidence in the strength of our competitive position and soundness of our approach.

With these changes in place, I feel confident that we will have the resources we need to continue to invest in long-term computing trends that offer the greatest opportunity to deliver value to our customers and shareholders, benefit to society, and growth for Microsoft.

With our approach to investing for the long term and managing our expenses, I know Microsoft will emerge an even stronger industry leader than it is today.

Thank you for your continued commitment and hard work.

Steve

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Jerry Yang and Steve Ballmer’s love affair: I Didn’t Say No, Baby come back…

Amarendra Bhushan — Thu, 06 Nov 2008 16:04:20 +0000

Yahoo CEO Jerry Yang is in a very unpleasant spot. Yang dismissed Microsoft’s offer earlier this year, claiming that the Windows maker was undervaluing the company. Truth be told, such comments earned him no friends in Redmond and it remains to be seen just what sort of deal will Yang obtain now.

Back then, Microsoft offered to pay $33 per Yahoo share. Now, Yahoo’s value dropped to a mere $14 per share and its hard to believe that Microsoft will prove as generous as it did in the past.

A year ago its stock price closed at close to $27 per share: today it closed below $14 per share, no doubt making that final offer from Microsoft of $33 per share a very attractive one in hindsight.

Yet, for three months between February and May, Ballmer pursued Yahoo and got rebuffed, while Yang, in the eyes of his critics, seemingly tried to do his best to repel Microsoft.

He talked to News Corp. about possibly fusing with MySpace. He met with Time Warner about an AOL merger. He created an employee severance package that critics described as a poison pill. He sought a partnership with Google.

“To this day, I would say the best thing for Microsoft is to buy Yahoo,” Yang said during an on-stage chat with journalist John Battelle at a Web 2.0 summit on Internet Age companies and their business strategies.

“Did we want to do the deal? Yes.”

Microsoft has said repeatedly that it is no longer interested in buying the floundering Northern California firm.

“Our position hasn’t changed,” Microsoft said in a statement released in October. “Microsoft has no interest in acquiring Yahoo. There are no discussions between the companies.”

Microsoft walked away from negotiations May 3 after Yahoo rejected an offer it raised from 31 dollars to 33 dollars per share, which amounted to 47.5 billion dollars.

“We believed we were doing the right thing every step of the way,” Yang said. “Both sides are to blame.”

Yahoo stock was priced at 13.90 per share in after-hours trading Wednesday.

Microsoft wanted to buy Yahoo to better battle Google, which claims the lion’s share of the multibillion-dollar Internet search and advertising market.

After ending talks with Microsoft, Yahoo announced an alliance with Google to put the Internet search king’s expertise to work pumping money from its floundering rival’s online advertising.

Google said Wednesday it is ending its bid for a joint search advertising partnership with Yahoo to avert “a protracted legal battle” with regulators.

The US Justice Department vowed to file a lawsuit to block the alliance on the grounds it would stifle competition in Internet search advertising by controlling up to 90 percent of the market.

This is the same Jerry Yang who described a previous offer by Microsoft as “ludicrous”, and said that Microsoft’s behaviour was “erratic and unpredictable”; who, according to Microsoft, made changes to Yahoo’s company plan to make any takeover more costly for Microsoft and the same Yang, who claims the Google deal was scuppered by the government as it doesn’t understand their business (I think they understand monopolies well enough Jerry…)

There is a sense of tragic self-delusion emanating from the comments of this nice man. Perhaps that explains his faith in the now scuttled Google-Yahoo advertising deal. “We’re disappointed with that,” he said when asked about it by Battelle. “It was certainly very defendable. I really thought that the government in this case does not understand our industry. They have a market definition that I think is too narrow.”

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