May 16th, 2008
Run by Wall Street? A Cause or a Company?
Guest post: Anshu Sharma is author of Anshu’s blog, which focuses on Software as a Service and the emerging SaaS Ecosystem. He is an Enterprise Irregular.
In light of the Yahoo! - Microsoft fiasco, fellow bloggers Larry Dignan and Vinnie Mirchandani have been asking the question whether there is too much emphasis on just one stakeholder - the shareholder. After all, shouldn’t a technology company (or any company for that matter) be equally focused on the value for customers, partners and employees.
I believe that the real problem is not that of prioritization of stakeholders but a more fundamental issue: Does your company stand for something?
Larry and Vinnie discussed the following in a recent conversation:
- Technology companies cater to Wall Street interests too much often at the expense of good strategy.
- Isn’t what a company does for customers and developers more important than shareholder interests?
- What’s wrong with being a mid-size technology company if customers and employees are happy and the products–software, hardware, services–fit a need? There’s nothing wrong with it, but Wall Street would lead folks to believe that any company that isn’t acquired by Oracle isn’t worth existing.
- And why are we listening to Wall Street at all given that analysts, investment bankers and other financial wonks can’t even manage their own businesses (subslime, credit swaps, write-offs galore)?
Even as I do agree that the recent focus on shareholder’s (short-term) returns is probably misplaced, the real problem is elsewhere.
What Does The Company Stand For?
The problem with Yahoo! is not just its mediocre financial performance compared to its more successful cousin in Mountain View - Google, but that Yahoo! does not seem to stand for anything and rarely arouses any passion amongst customers, employees or partners. Its a listless organization that seems to be going through the motions - see this excellent post by Jeff Nolan.
Marc Andreesen recently wrote up an article praising dual-class structure to help management teams prevent hostile takeovers. I believe this is the wrong remedy - its a cure for a disease that should be prevented in the first place: A lack of clear vision around what a company is trying to achieve.
A company (and its management team) deserve to be independent as long as they inspire confidence among investors, employees, parters and customers that the company has a vision that it aspires to that the stakeholders can commit to.
After all, what does Yahoo! stand for? A hodge podge of websites relating to entertainment, communication, search etc with no grand vision of changing our (digital) lives. There are hundreds of smaller companies that are not under any duress to be acquired because their management teams inspire confidence around a vision.
Here is a list of companies that I don’t know what they stand for, and hence will not
have shareholders clamoring to keep them independent if the right opportunity came along:
- BEA (Sold)
- Yahoo!
- Tibco
- WebMethods (Sold)
- IAC (Bought/Sold/Consolidated/Unbundled)
Contrast this with list with:
- Salesforce.com (Changing the enterprise software world; See my disclaimer)
- Google (Organizing World’s Information)
- Amazon (Changed Retail, Now Web Services)
- COST (Concur, Omniture, Salesforce and Taleo - the SaaS horsemen, per Phil Wainewright)
The same holds true beyond technology businesses - if your company does not stand for something bigger than management’s entrenched interests and egos, its not very likely to inspire shareholders to forgo a 50% overnight return.
There is a story of two labourers working at a construction site, breaking stones. A passer-by asked one labourer what he was doing. “Breaking stones”, was the bored reply. A few yards down the road the traveller came across the other labourer. This worker was different; there was a spring in his steps and a tune on his lips. So the passer-by asked, “What are you doing?” “Oh, I am helping Christopher Wren to build the greatest
cathedral in the world.” The vision of the great architect, Sir Christopher Wren, of building a cathedral that was to be the pride of England, gave meaning to the labourer’s work.
So, the question is: Do your stakeholders see your company as a stone-breaking venture
or as a company that’s building a Cathedral?
May 16th, 2008
XP meets XO: Will Linux get an equal shot?
Updated: The One Laptop Per Child program will put XP on its XO laptop and children in the developing world will have a choice between Windows and Linux.
On the surface, a little choice isn’t going to kill anybody. In fact, choice is good. And if some poor kids can get a laptop, learn a bit and be exposed to the world I don’t care about the operating system.
But here’s what gives me pause about XP coming to the XO (statement, Techmeme): There’s no way Linux will get an equal shake on OLPC’s XO. In fact, I reckon that more XO units will ship with XP than Linux in the not too distant future. Why? Governments are making the buying decisions. Not kids.
As Mary Jo Foley reports XOs will go with either Linux or Windows based on the preference of governments. Quoting an OLPC spokeswoman, Mary Jo reports:
“Laptops will be installed with one of two operating systems - Microsoft Windows OR Linux-based Sugar OS at the factory, based on the preference of governments and NGOs. In the case of these trials, the XOs will ship with Windows. In addition to these choices, in the future OLPC intends to develop … the ability to have both on the same machine.”
How quickly will the OLPC (all resources) have both on one machine? Probably not quickly.
The big question: What OS would the kids choose? I’d argue that the Linux interface would win. I’ve seen my own daughter navigate the XO Linux operating system even though I couldn’t. Kids just get it. Let’s compare and contrast:
Microsoft’s opening screen:
The XO opener:
My daughter went from that opening “X” to drawing and goofing around in seconds. The XP screen is colorful, but a child that has never seen a laptop before is going to look at those icons and be instantly overwhelmed. My daughter could figure out XP too, but that’s because our home computer has it. Nevertheless, I’d have to explain the start menu and direct her to her shortcuts. If she had no previous exposure to the Linux OS or XP she’d gravitate to the Linux XO interface all things being equal.
You have to assume that a child has never had a computer before and Windows doesn’t play to that market. Perhaps Microsoft simplifies XP’s interface down to four icons, but it’s doubtful. There’s a lot of inertia to overcome–the parents and governments know Windows–to even give Linux a fair shake.
The big takeaway: The kids actually getting these XOs won’t be making the OS call–at least not initially.
Update: Walter Bender, former president of software and content at OLPC, is helping to launch Sugar Labs, which will take the XO Linux OS and continue the mission on other platforms. This move does two things: First, it solidifies that the OLPC project will most likely stick with XP. And second, Sugar Labs may wind up on the eeePC from Asus. Here’s the Sugar Labs announcement and Xconomy’s take.
More reading:
- Lessons learned: Two weeks with the XO laptop
- Gallery: Unboxing OLPC’s XO laptop
- Gallery: The OLPC XO Sugar OS
- Christopher Dawson: Sugar-free Windows, as predicted
- John Carroll: Noble goals and politics at the OLPC
- Microsoft denies dual-boot Linux/Windows XO laptops are on its agenda
May 16th, 2008
Jerry Yang is busy…Writing email
Yahoo filed its internal communications about Carl Icahn’s proxy war plans with the Securities and Exchange Commission. The takeaway: Yahoo CEO Jerry Yang has been writing a lot of emails.
To senior vice presidents at Yahoo, Yang delivered a few talking points following Icahn’s first volley and the company’s response (Techmeme).
Here’s the full text of that letter:
To: all-svps-and-above@yahoo-inc.com
From: Jerry
Subject: our response to carl icahnleaders,
as you know, carl icahn today announced his intention to nominate 10 directors to take control of our board of directors at our 2008 annual meeting.
this afternoon we issued our response to mr. icahn and are sending an email to all employees updating them on these recent developments. a copy of our response, including the letter to mr. icahn, is attached. i urge you to read it.
as we outline in our letter, we believe our independent board has more than demonstrated the fact that it has the knowledge, experience and commitment to maximize value for all yahoo! stockholders.
i will be scheduling a call with you soon. in the meantime please find below some talking points for you to use with your teams.
jerry
And Yahoo’s talking points:
- Carl Icahn today announced his intention to nominate 10 directors to take control of our board of directors at our 2008 annual meeting.
- We believe much of what Mr. Icahn said today reflects a significant misunderstanding of the facts about how hard our independent board has worked—and continues to work—to maximize stockholder value. We believe our independent board has the knowledge, experience and commitment to maximize value for all Yahoo! stockholders.
- Soon, we will file preliminary proxy materials with the SEC that will describe the matters to be voted on at the annual meeting, including the Company’s nominees for election to our board of directors, and the board’s recommendation. Once those materials are cleared by the SEC, we will mail them to our stockholders.
- Stockholders, as equity owners of the Company, have the ability to nominate one or more directors for election to the board at the Company’s annual meeting as long as they comply with the notice requirements contained in our bylaws. Under our bylaws, today was the last day that a stockholder could nominate a candidate for director.
To employees, Yang’s message was keep your heads down and stay focused.
Here’s the full text:
To: all-worldwide@yahoo-inc.com
From: Jerry
Subject: today’s news
yahoos,
today carl icahn announced his intent to nominate a slate of ten directors to take control of our board of directors at this year’s annual meeting. we sent him a letter in response, which we made public in a press release. i’m attaching a copy of that press release, including the full text of our letter, and you should read it carefully.
we always want to hear the views of our stockholders, but you should know that mr. icahn’s letter reflects a significant misunderstanding of the facts about the microsoft proposal and the diligence with which our board evaluated and responded to that proposal. we believe our board has the independence, knowledge, experience and commitment to maximize value for all of our stockholders. yahoo! is a great company with a truly unique set of highly-valuable assets that is growing, profitable and executing well on its strategic plan to enhance our leadership position in online advertising. our solid results for the first quarter of 2008 are a testament to this.
today’s events will undoubtedly draw a lot of media attention and there will be lots of speculation about what happens next for yahoo!. i ask all of you to put aside the rumors and speculation and stay focused on the business at hand and what we do best — transforming the online experiences of our users, advertisers, publishers and developers.
i know you all have a lot of questions and so i’ve also attached some faqs that will address some of your questions. as we’ve said before we’ll do our best to continue to update you as new information becomes available. thank you again for your continued hard work as we work together to make yahoo! a stronger leader in the online marketplace and an even better company.
jerry
And those internal FAQs:
Can stockholders nominate directors to the board?
Stockholders, as equity owners of the Company, have the ability to nominate one or more directors for election to a board at the Company’s annual meeting as long as they comply with the requirements contained in our bylaws. Under our bylaws, today was the last day that a stockholder could nominate a candidate for director.
How long will all this take?
We can’t speculate on how events will develop at this time, but we plan to hold our annual meeting in a couple of months. I’d ask all of you to stay focused on the business at hand and what we do best — transforming the experiences of our users, advertisers, publishers and developers, all while enhancing our leadership position in the online marketplace.
What’s our next step?
We will file preliminary proxy materials with the SEC that will describe the matters to be voted on, including the Company’s nominees for election to the board, and the board’s recommendation. Once those materials are cleared by the SEC, we will mail them to our stockholders.
In the meantime, we should remain focused on doing what we do best — transforming the experiences of our users, advertisers, publishers and developers, all while enhancing our leadership position in the online marketplace.
We will continue to update you as information becomes available but please remember that we are subject to various legal restrictions on what we can say and when we can say it.
What can employees do?
We ask you to continue to put aside all rumors and speculation you may be hearing. None of us should allow external reports to shift our focus away from doing what we do best — transforming the experiences of our users, advertisers, publishers and developers, all while enhancing our leadership position in the online marketplace.
May 16th, 2008
iPhone’s international rollout continues; 10 million units not a stretch
Apple’s iPhone will be headed to a few more countries courtesy of a new deal with French telecom carrier Orange.
In a statement, Orange said:
Orange today announced a new agreement with Apple to bring the iPhone to Orange customers in Austria, Belgium, the Dominican Republic, Egypt, Jordan, Poland, Portugal, Romania, Slovakia, Switzerland and Orange’s African markets later this year.
The Orange announcement follows deals with Vodafone and Rogers Communications. According to the Associated Press, Orange has exclusive iPhone deals in Belgium and Romania and co-exclusive or non-exclusive deals in the other countries.
Meanwhile, America Movil, a Mexican wireless carrier, said May 7 that it will bring the iPhone to Latin America. The America Movil deal gives the iPhone exposure to 159 million subscribers.
Apple has sold 5.4 million iPhones through March and these international pacts should give the company enough exposure to hit its 10 million unit goal. Considering that Apple is more than halfway to its shipment target with a 3G iPhone brewing and a bevy of international deals the 10 million unit goal may be an easy mark.
While these incremental deals certainly add to the potential iPhone units Apple can sell, the big news will come when the company reaches a pact with China Mobile. According to Piper Jaffray, a pact with China Mobile would expose the iPhone to more than 369 million subscribers.
May 16th, 2008
Facebook flap: Google’s side
Amid the Facebook move to block Google’s Friend Connect, the search giant has responded.
As expected, Google had a few issues with Facebook’s privacy assessment of Google Friend Connect. There’s a lot of debate on Techmeme about the issue and it’s a big one as all of these companies are wrestling over social data portability. Since most of these data portability efforts aren’t out of the press release stage, the verbal jousting isn’t all that surprising.
Robert Scoble thinks Facebook has a point. Others are on Google’s side. Add it up we have a Google said, Facebook said situation. Here’s the reaction from Google’s press folks verbatim.
We’re disappointed that Facebook disabled their users’ ability to use Friend Connect with their Facebook friends. We want to help you understand a bit more about what’s going on on the Friend Connect side with respect to users’ information.
User privacy is of the utmost importance, and Friend Connect was designed to strongly preserve it. The larger issue here is users’ control of their data. People find the relationships they’ve built on social networks really valuable, and they want the option of bringing those friends with them elsewhere on the web. Google Friend Connect is designed to keep users fully in control of their information at all times. Users choose what social networks to link their Friend Connect account to. (They can just as easily unlink it.) We never handle passwords from other sites, we never store social graph data from other sites, and we never pass users’ social network IDs to Friend Connected sites or applications.
For example, here’s what an application running on a Friend Connected site can access about a user, Joe, who has linked in his hi5 account:
7547238438 joe [picture] 9438265867 8348357012
Translation: Not much. A third party app has access to:
- Your Google Friend Connect ID. This is a number. It is not a name, and it is not your hi5 ID.
- Your friendly name that you entered into Friend Connect (or from hi5 if you didn’t).
- Your photo. And only if you’ve chosen to make that photo public on hi5.
- The Google Friend Connect IDs of any of your hi5 friends who are also members of this site. (NOT all of your hi5 friends. Not their hi5 IDs.)That’s it. These apps have no knowledge of who these friends are. They have no access to additional profile data — yours or your friends’. No idea who else is on your friends list on your social network.
From here I have to dig in on each step along the data portability chain to see what the real deal is. At a high level, it’s a walled garden scrum.
In the meantime, here’s Dan Farber’s assessment of the data portability efforts.
May 16th, 2008
News to know: XP meets XO; Yahoo; Facebook; Verdiem; DIY phishing
Notable headlines:
Mary Jo Foley: It’s finally official: XP is coming to the XO. Christopher Dawson: Sugar-free Windows, as predicted
Larry Dignan: Icahn launches Yahoo proxy fight; Mark Cuban’s return? Yahoo to Icahn: You misunderstand
- Mary Jo Foley: The real question: Is Microsoft still interested in Yahoo?
- Icahn’s letter. Yahoo’s response. Techmeme.
Dancho Danchev: DIY phishing kits introducing new features
- Nate McFeters: Safari “Carpet Bomb” attack information released
- Dan Kusnetzky: Virtualization and security
Heather Clancy: Verdiem spruces up its Survey PC power management software
Dion Hinchcliffe: Mashups turn into an industry as offerings mature
Michael Krigsman: 10 attributes of bad CIOs (self test)
May 15th, 2008
Yahoo to Icahn: You misunderstand
Yahoo’s board has responded to activist investor Carl Icahn: “Your letter reflects a significant misunderstanding of the facts about the Microsoft proposal.”
That letter–delivered by Icahn earlier Thursday (Techmeme)–has one theme: Yahoo’s board botched the Microsoft deal and hasn’t served shareholder interest.
In its rebuttal letter, Yahoo Chairman Roy Bostock said:
Unfortunately, your letter reflects a significant misunderstanding of the facts about the Microsoft proposal and the diligence with which our board evaluated and responded to that proposal. A fair-minded review of the factual record leads to one conclusion: that Yahoo!’s ten-member board, comprised of nine independent directors along with Yahoo! CEO Jerry Yang, remains the best and most qualified group to maximize value for all Yahoo! stockholders.
Conversely, we do not believe it is in the best interests of Yahoo! stockholders to allow you and your hand-picked nominees to take control of Yahoo! for the express purpose of trying to force a sale of Yahoo! to a formerly interested buyer who has publicly stated that they have moved on. Please may I remind you that there is currently no acquisition offer on the table from that company or any other party. That said, we have been crystal clear in our stance that we have been and remain willing to consider any proposal from any party including Microsoft if it offers our stockholders full and certain value.
Translation: You’re trying to take over our company even though Microsoft isn’t in cahoots with you–yet.
May the proxy war games begin.
Here’s the full text:
Dear Mr. Icahn:
We are in receipt of your letter with regard to your intention to seek control of Yahoo!’s board of directors.
Unfortunately, your letter reflects a significant misunderstanding of the facts about the Microsoft proposal and the diligence with which our board evaluated and responded to that proposal. A fair-minded review of the factual record leads to one conclusion: that Yahoo!’s ten-member board, comprised of nine independent directors along with Yahoo! CEO Jerry Yang, remains the best and most qualified group to maximize value for all Yahoo! stockholders.
Conversely, we do not believe it is in the best interests of Yahoo! stockholders to allow you and your hand-picked nominees to take control of Yahoo! for the express purpose of trying to force a sale of Yahoo! to a formerly interested buyer who has publicly stated that they have moved on. Please may I remind you that there is currently no acquisition offer on the table from that company or any other party. That said, we have been crystal clear in our stance that we have been and remain willing to consider any proposal from any party including Microsoft if it offers our stockholders full and certain value.
From the beginning of the process with Microsoft, Yahoo!’s independent directors focused on one central goal: how best to maximize stockholder value. At all times directing this process, Yahoo!’s independent directors carefully considered Microsoft’s initial unsolicited proposal, which was at the time valued at $31 per share. After considering input from its financial advisers the board unanimously concluded that Microsoft’s proposal significantly undervalued Yahoo! and was, therefore, not in the best interests of the company or our stockholders. While we rejected this offer publicly on February 11, 2008, we could not have been more clear in that communication and in every subsequent communication, both public and private, that we were and are willing to enter into any transaction that would maximize value for stockholders and provide them certainty of value.
The record of our efforts to engage Microsoft in meaningful discussions is unequivocal. Following receipt of Microsoft’s proposal on January 31, our board of directors has met over twenty times to review Microsoft’s proposal and Yahoo!’s other strategic alternatives. Throughout this process our board kept an open mind and an open ear. Our independent directors met with several of our largest stockholders to solicit their views and to make it clear that Yahoo!’s independent board is fully committed to maximizing stockholder value. In addition, at the direction of our board, our management team met with many of our investors to provide insight into Yahoo!’s strategy and views on value.
Our board’s openness also extended to Microsoft. Without reciting all of the contacts between us and between our advisers, the senior-most management of Yahoo! and Microsoft and the companies’ respective financial advisers spoke on numerous occasions and met in person seven times. During those meetings, Yahoo! discussed its strategic objectives in search and display advertising monetization, its perspectives on operating strategy and integration in a transaction with Microsoft, its perspectives on transaction synergies, and other non-price deal terms. Because certainty of closing is a critical issue, we sought to understand Microsoft’s thinking with regard to the regulatory issues associated with a potential transaction. In fact, at the board’s direction, our lawyers on March 28 asked for additional information in this regard, information which was never forthcoming.
On April 15th, a meeting was held at Yahoo!’s request. At that meeting, which included our respective financial advisors, we made clear, once again, that we were open to a transaction with Microsoft. During those discussions, Yahoo! made a detailed presentation of its strategic and financial plan, its thoughts on integration and its view with respect to the potential synergies that could be achieved in a transaction, essentially laying the foundation for Microsoft to understand—and respond to—our board’s conclusion that Microsoft’s offer substantially undervalued the company. Following that meeting we also provided to Microsoft a list of key non-price deal terms that our board believed were critical items to be addressed in a deal to provide reasonable protections for our stockholders.
Throughout this period, Microsoft continued to state that it would not raise its offer, and even suggested that it could lower it.
Despite this failure by Microsoft to respond in any substantive way to any of Yahoo!’s requests, on May 2nd, the same day we first learned of Microsoft’s apparent willingness to increase its proposal to $33 (although this oral “offer” was never delivered in writing and did not include details of a cash/stock mix), our board determined to continue discussions, instructing Jerry Yang to indicate to Microsoft that we would be prepared to enter into a transaction that valued Yahoo! at $37 per share and that provided reasonable certainty of value and certainty of closing. This was communicated to Microsoft in-person at a meeting in Seattle on May 3rd. With Microsoft’s offer at $33 and Yahoo!’s counter-proposal at $37, Microsoft elected, within hours, to walk away from the negotiating table and informed us that they were “moving on,” having never engaged further on price or any of the key non-price deal terms.
In short, Yahoo!’s board was at every point in this process prepared to enter into a transaction with Microsoft that would maximize stockholder value—and included certainty of value and closing. What Yahoo!’s independent board refused to do was to allow control of this company to be acquired for less than its full value.
That brings us to today. Our business is performing well as evidenced by our first quarter results. As we have publicly stated, our board continues to actively and expeditiously explore strategic alternatives to maximize stockholder value. None of the alternatives we are considering would preclude us from entering into a transaction with Microsoft or any other party.
We continue to believe that Yahoo!’s current board has the independence, the knowledge, and the commitment to navigate the Company through the rapidly changing Internet environment and to deliver value for Yahoo! and its stockholders.
We look forward to a productive dialogue.
Very truly yours,
Roy Bostock
Chairman of the Board
May 15th, 2008
Facebook: Google Friend Connect violates our privacy standards
The social networking ground war is well underway. Facebook said Thursday that it will block Google’s Friend Connect services because it “redistributes user information from Facebook to other developers without users’ knowledge.”
Facebook’s Charlie Cheever writes regarding Google Friend Connect:
We’re excited that our industry partners are taking greater steps toward openness and enabling users to share their information around the web. We hope, though, that we can collectively find a model that allows users to share data while protecting the privacy of our users’ data and ensuring that the user is always in control.
In the past, when we found applications passing user data to another party (for instance, to ad networks for the purpose of targeting), we suspended those applications and worked with those developers to ensure they respect user privacy. Now that Google has launched Friend Connect, we’ve had a chance to evaluate the technology. We’ve found that it redistributes user information from Facebook to other developers without users’ knowledge, which doesn’t respect the privacy standards our users have come to expect and is a violation of our Terms of Service. Just as we’ve been forced to do for other applications that redistribute data in a way users might not expect or understand, we’ve had to suspend Friend Connect’s access to Facebook user information until it comes into compliance. We’ve reached out to Google several times about this issue, and hope to work with them to enable users to share their data exactly when and where they choose.
An interesting volley eh? It sure didn’t take long for Facebook to fire back at Google, which is keen on being a bigger social networking player.
If what Facebook argues is true–chances are Google will beg to differ–the company has a point. These interconnections are swell until there’s something exposed that you’d like to keep private.
Privacy and openness go hand-in-hand - as we open up, we have to make sure that users always have control of their information, and understand how and where it’s being used. We’ve maintained that trusted environment while opening up Facebook Platform and the social graph to external developers by requiring third-party application developers to treat user information with the same respect we do.
The conundrum: How many competitors are going to block out others in the name of user privacy?
May 15th, 2008
Does the Kindle have iPod-ish potential?
Amazon’s Kindle may meaningfully contribute to the e-tailer’s revenue in a couple of years, according to Citigroup analyst Mark Mahaney.
Mahaney’s take–delivered in a research note outlining the bullish case for Amazon–takes a few leaps (Techmeme). Mahaney has little data on the Kindle (just like the rest of us); enjoys the device after being an early doubter; and reckons that the device can gain a big following. And despite a few annoying features–it’s too easy to turn a page by accident–the positives outweigh the negatives by a wide margin.
The lingering question: How material to Amazon’s results can the Kindle be? After all, Amazon Web Services is barely a rounding error. Kindle (all resources) would have to really take off to make it out of the “other” revenue line. But Mahaney takes a crack at it anyway, which is good considering Amazon just recently fixed its supply issues with the Kindle.
Mahaney puts together the following clues:
- The Kindle is routinely among the best electronics sellers on Amazon.com;
- Customer reviews abound and that indicates a rabid fan base;
- And those reviews are positive.
Then Mahaney makes the following assumptions:
- The Kindle’s first three year adoption rate is half that of the iPod at its comparable life cycle;
- Average selling prices fall 15 percent a year;
- Amazon recognizes revenue over two years;
- And Kindle users buy a book a month (that’s a big leap, but newspaper subs could make that assumption more palatable).
He mixes all of that up, connects a few dots and magically delivers this chart:
Presto: The Kindle has $741 million in total revenue. Is that likely? Sounds a bit optimistic, but then again I’m guessing just as much as Mahaney is.
Luckily, Mahaney has a few other assumptions:
Mahaney acknowledges that he has a laundry list of caveats, but his underlying thesis is that the Kindle is important to Amazon. For instance, Amazon makes $4 to $5 on each physical book sale. The profit on a digital book could come close. The biggest plus: The Kindle would shift the economics for Amazon and largely eliminate fulfillment and shipping costs. Add it up and the margins are better.
In other words, the Kindle moves Amazon toward digital distribution, which acts as an insurance policy for the future.
May 15th, 2008
Post your blog on Between the Lines
We’re looking for a few more good bloggers and you can help.
We’re opening up our Between the Lines blog to user-submitted posts. We’re looking for submissions in several key areas — VoIP, Research in Motion; servers and mainframes; and, more broadly, Web 2.0/3.0 technologies. Who can post on ZDNet? Bloggers who have established blogs, users that have something good to say but want to pursue “one off” posts, and those who just want to chime in from time to time. If you’re trying to get more eyeballs for your own blog, and you think you have what it takes to be on ZDNet, send us a recent post. If our editors like what they see, your entry will be posted on ZDNet, along with a prominent link back to your blog.
Here’s the submission tool (comments to improve it are welcome). And here are the steps:
- Establish an account with ZDNet.
- Log in to the tool with your ZDNet credentials. Anyone that already has posted a Talkback has these.
- Click on the “Select Blogs” tab and then click “Add a blog”.
- Select “Between the Lines” and click “Add Blog”.
- At the bottom of the submission tab you’ll see “Post new content.”
- Then enter your headline, post and categories. Hit submit.
- From there, your post will show up for an editor to approve.
- If approved, it’ll wind up in Between the Lines.
May 15th, 2008
Icahn launches Yahoo proxy fight; Mark Cuban’s return?
As expected, billionaire Carl Icahn launched his proxy war to turn over Yahoo’s board of directors and one of his nominees is Mark Cuban, who sold Broadcast.com to Yahoo and then took those funds to buy the Dallas Mavericks.
Just for entertainment value I may buy a share just to vote for Cuban.
In a letter to Yahoo Chairman Roy Bostock (see below), Icahn said the board was “irresponsible” in turning down Microsoft’s bid. The board was also hiding “behind management’s more than overly optimistic financial forecasts.”
Money quote:
I am perplexed by the board’s actions. It is irresponsible to hide behind management’s more than overly optimistic financial forecasts. It is unconscionable that you have not allowed your shareholders to choose to accept an offer that represented a 72% premium over Yahoo’s closing price of $19.18 on the day before the initial Microsoft offer. I and many of your shareholders strongly believe that a combination between Yahoo and Microsoft would form a dynamic company and more importantly would be a force strong enough to compete with Google on the Internet.
Icahn also noted that he bought 59 million shares of Yahoo. Update: Yahoo has responded with a letter noting that Icahn lacks all the details about the Microsoft negotiations.
Also see: Can Icahn bring Microsoft’s Yahoo bid back?
Mary Jo Foley: The real question: Is Microsoft still interested in Yahoo?
In a nutshell, Icahn said Yahoo’s board was “irrational” so he wants a new one. He nominated 10 directors. Icahn will be joined by Keith Meister, Cuban and former Viacom CEO Frank Biondi Jr. Other names–Lucian Bebcuk, John Chapple, Adam Dell, Edward Meyer, Brian Posner and Robert Shaye–were roughly as expected.
All 10 Yahoo directors are up for re-election.
Will Icahn’s slate win? It’s unclear. A Yahoo shareholder has the following choices:
- Trust Icahn’s takeover and hope he can control Yahoo and then sell to Microsoft.
- Keep the status quo because Microsoft may not come back.
Here’s Icahn’s letter:
Carl C. Icahn
ICAHN CAPITAL LP
767 Fifth Avenue, 47th Floor
New York, NY 10153May 15, 2008
Roy Bostock
Chairman
Yahoo! Inc.
701 First Avenue
Sunnyvale, CA 94089Dear Mr. Bostock:
It is clear to me that the board of directors of Yahoo has acted irrationally and lost the faith of shareholders and Microsoft. It is quite obvious that Microsoft’s bid of $33 per share is a superior alternative to Yahoo’s prospects on a standalone basis. I am perplexed by the board’s actions. It is irresponsible to hide behind management’s more than overly optimistic financial forecasts. It is unconscionable that you have not allowed your shareholders to choose to accept an offer that represented a 72% premium over Yahoo’s closing price of $19.18 on the day before the initial Microsoft offer. I and many of your shareholders strongly believe that a combination between Yahoo and Microsoft would form a dynamic company and more importantly would be a force strong enough to compete with Google on the Internet.
During the past week, a number of shareholders have asked me to lead a proxy fight to attempt to remove the current board and to establish a new board which would attempt to negotiate a successful merger with Microsoft, something that in my opinion the current board has completely botched. I believe that a combination between Microsoft and Yahoo is by far the most sensible path for both companies. I have therefore taken the following actions: (1) during the last 10 days, I have purchased approximately 59 million shares and share-equivalents of Yahoo; (2) I have formed a 10-person slate which will stand for election against the current board; and (3) I have sought antitrust clearance from the Federal Trade Commission to acquire up to approximately $2.5 billion worth of Yahoo stock. The biographies of the members of our slate are attached to this letter. A more formal notification is being delivered today to Yahoo under separate cover.
While it is my understanding that you do not intend to enter into any transaction that would impede a Microsoft-Yahoo merger, I am concerned that in several recent press releases you stated that you intend to pursue certain “strategic alternatives”. I therefore hope and trust that if there is any question that these “strategic alternatives” might in any way impede a future Microsoft merger you will at the very least allow shareholders to opine on them before embarking on such a transaction.
I sincerely hope you heed the wishes of your shareholders and move expeditiously to negotiate a merger with Microsoft, thereby making a proxy fight unnecessary.
Sincerely yours,
CARL C. ICAHN
And here’s Icahn’s board nominees (shortened bios):
- Lucian A. Bebchuk: The William J. Friedman and Alicia Townsend Friedman Professor of Law, Economics, and Finance and Director of the Program on Corporate Governance at Harvard Law School. Bebchuk is also a Research Associate of the National Bureau of Economic Research and Inaugural Fellow of the European Corporate Governance Network.
- Frank J. Biondi, Jr.: Former CEO of Universal Studios and Viacom.
- John H. Chapple: President of Hawkeye Investments LLC, a privately-owned equity firm investing primarily in telecommunications and real estate ventures frequently working in conjunction with Rally Capital LLC. Prior to forming Hawkeye, Chapple worked to organize Nextel Partners, a provider of digital wireless services in mid-size and smaller markets throughout the U.S. He became the President, Chief Executive Officer and Chairman of the Board of Nextel Partners and its subsidiaries in August of 1998.
- Mark Cuban: Owner of the Dallas Mavericks. Co-founder of HDNet. He also founded Broadcast.com in 1995 and sold it to Yahoo in July 1999.
- Adam Dell: Managing General Partner of Impact Venture Partners, a venture capital firm focused on information technology investments.
- Carl C. Icahn: Activist shareholder bar none. The entire bio: Mr. Icahn has served as chairman of the board and a director of Starfire Holding Corporation, a privately-held holding company, and chairman of the board and a director of various subsidiaries of Starfire, since 1984. Since August 2007, through his position as Chief Executive Officer of Icahn Capital LP, a wholly owned subsidiary of Icahn Enterprises L.P., and certain related entities, Mr. Icahn’s principal occupation is managing private investment funds, including Icahn Partners LP, Icahn Partners Master Fund LP, Icahn Partners Master Fund II L.P. and Icahn Partners Master Fund III L.P. Prior to August 2007, Mr. Icahn conducted this occupation through his entities CCI Onshore Corp. and CCI Offshore Corp since September 2004. Since November 1990, Mr. Icahn has been chairman of the board of Icahn Enterprises G.P. Inc., the general partner of Icahn Enterprises L.P. Icahn Enterprises L.P. is a diversified holding company engaged in a variety of businesses, including investment management, metals, real estate and home fashion. Mr. Icahn was chairman of the board and president of Icahn & Co., Inc., a registered broker- dealer and a member of the National Association of Securities Dealers, from 1968 to 2005. Mr. Icahn has served as chairman of the board and as a director of American Railcar Industries, Inc., a company that is primarily engaged in the business of manufacturing covered hopper and tank railcars, since 1994. From October 1998 through May 2004, Mr. Icahn was the president and a director of Stratosphere Corporation, the owner and operator of the Stratosphere Hotel and Casino inLas Vegas, which, until February 2008, was a subsidiary of Icahn Enterprises L.P. From September 2000 to February 2007, Mr. Icahn served as the chairman of the board of GB Holdings, Inc., which owned an interest in Atlantic Coast Holdings, Inc., the owner and operator of The Sands casino in Atlantic City until November 2006. Mr. Icahn has been chairman of the board and a director of XO Holdings, Inc., a telecommunications services provider, since February 2006, and of its predecessor from January 2003 to February 2006. Mr. Icahn has served as a Director of Cadus Corporation, a company engaged in the ownership and licensing of yeast-based drug discovery technologies since July 1993. In May 2005, Mr. Icahn became a director of Blockbuster Inc., a provider of in-home movie rental and game entertainment. In October 2005, Mr. Icahn became a director of WestPoint International, Inc., a manufacturer of bed and bath home fashion products. In September 2006, Mr. Icahn became a director of ImClone Systems Incorporated, a biopharmaceutical company, and since October 2006 has been the chairman of the board of ImClone. In August 2007, Mr. Icahn became a director of WCI Communities, Inc., a homebuilding company, and since September 2007 has been the chairman of the board of WCI. In December 2007, Mr. Icahn became a director of Federal-Mogul Corporation, a supplier of automotive products, and since January 2008 has been the chairman of the board of Federal-Mogul. In April 2008, Mr. Icahn became a director of Motricity, Inc., a privately-held company that provides mobile content services and solutions. Mr. Icahn received his B.A. from Princeton University.
- Keith A. Meister: Icahn’s right-hand man and Principal Executive Officer and Vice Chairman of the Board of Icahn Enterprises G.P. Inc., the general partner of Icahn Enterprises L.P., a diversified holding company engaged in a variety of businesses, including investment management, metals, real estate and home fashion.
- Edward H. Meyer: CEO and Chief Investment Officer of Ocean Road Advisors, Inc., an investment management company.
- Brian S. Posner: Private investor. From 2005 through March 2008, he served as Chief Executive Officer and co-Chief Investment Officer of ClearBridge Advisors LLC (and its predecessor company, CAM North America), an asset management company based inNew York with approximately $90 billion in assets and a wholly owned subsidiary of Legg Mason Inc.
- Robert K. Shaye: Co-Chairman and Co-CEO of New Line Cinema. As the Founder of New Line Cinema and a filmmaker himself, Robert Shaye has spent more than 40 years developing and distributing films that reflect a wide array of cultural movements, creating new paradigms for the motion picture business, and most importantly, entertaining millions of moviegoers.
May 15th, 2008
We’ve been acquired: CBS buys CNET
Nothing like scanning the headlines and finding out your parent company has been acquired.
CBS Corporation To Acquire CNET Networks, Inc.
The details: “Under the terms of the agreement, CBS will make a cash tender offer for all issued and outstanding shares of CNET Networks for $11.50 per share, representing an equity value of approximately $1.8 billion. The acquisition will make CBS one of the 10 most popular Internet companies in the United States, with a combined 54 million unique users per month, and approximately 200 million users worldwide.”
I don’t have a whole lot to say on the matter except for:
- Wow.
- Will my CBS Sportsline fantasy football account be comped?
You can read the statement for yourself. Back to our regularly scheduled programming.
See Silicon Alley Insider and PaidContent.org for more.
May 15th, 2008
Can Icahn bring Microsoft’s Yahoo bid back?
Updated: Billionaire investor Carl Icahn announced an alternate board of directors for Yahoo in a move that could revive a Microsoft bid. Will Microsoft chief Steve Ballmer bite?
As expected Icahn announced his alternate slate, which includes Mark Cuban, who sold Broadcast.com to Yahoo in 1999. Despite all the chatter about Icahn and how Microsoft needs Yahoo it’s possible that Ballmer may have genuinely turned sour on Microsoft’s bid. Perhaps it was employee feedback or Yahoo’s insistence on a higher price. Icahn will have to boot Yahoo’s entire board if Microsoft has a shot to buy the Web portal–and do it in a way that will ensure a decent integration. Even then all the reasons why Microsoft walked away are still there.
Meanwhile, Yahoo could still proceed with a Google search outsourcing pact, which would turn Microsoft off. For all the talk about how Icahn pushed for change at Motorola and BEA, which ultimately sold to Oracle, this Yahoo gambit is no sure bet.
“Given Icahn’s history, we believe it is unlikely he is investing in Yahoo!’s management for the long term and that it is probable he will take action to bring Microsoft back to the table,” says Piper Jaffray analyst Gene Munster.
Analysts expect Icahn to nominate a board that is basically the same cast of characters that Microsoft would have pushed.
UBS analyst Benjamin Schachter says Icahn is likely to nominate John Chapple, former CEO of Nextel; Edward Meyer, former CEO of Grey Global Advertising Group; Jaynie Studenmund, former operating chief at Overture and Vanessa Whitman, CFO of Adelphia. Microsoft was going to nominate all of those folks, according to a Wall Street Journal report April 24.
Schachter says:
Our view is that Icahn’s move only makes sense if he thinks he can revive the Microsoft bid and has reason to believe that Microsoft would be amenable if he takes control. While the individuals selected by Icahn have not been released, we would be surprised if they differed from Microsoft’s original selection.
A few scenarios:
- Yahoo runs to Google (again): If Yahoo wants to truly stay independent it will have to outsource search to Google to keep Microsoft–the only likely bidder–away. Icahn’s role will be minimized if he can’t convince Ballmer to bid. Google is the most likely option for Yahoo given that negotiations with AOL and MySpace haven’t delivered much, says Jeffries & Co. analyst Youssef Squali.
- Microsoft hangs back to let Icahn do the dirty work. Proxy fights are distractions. Ballmer is likely to hang back and do nothing. Let Icahn lead, distract Yahoo management and allow Microsoft to focus a bit. This option is the most likely one right now.
- Microsoft comes back to the table with a bid of $34 or so. It’s highly unlikely that Microsoft will rush back to the table, especially if Yahoo goes scorched earth with Google. Icahn will have to turn over the board before Microsoft comes back.
- Ballmer decides Yahoo isn’t worth it. Many analysts still expect Microsoft and Yahoo to merge at some point, but do you really want to bet on that?
- Yahoo management is distracted due to Icahn, falls short of its three-year financial targets and Icahn wastes his time. Yahoo shares fall and taking Microsoft’s offer looks like one of the biggest financial blunders ever.
Thoughts?
May 15th, 2008
Ask.com buys Dictionary.com; Bolsters reference content
Ask.com plans to buy Lexico Publishing Group, the company behind Dictionary.com, Thesaurus.com and Reference.com, for an undisclosed sum.
The fourth largest search engine briefed a few reporters on its plans such as News.com’s Stephen Shankland. The deal is expected to be officially announced Thursday.
Shankland reports:
Ask.com didn’t release terms of the acquisition, but Lexico is “highly profitable, with high double-digit growth for a couple years,” said Jim Safka, chief executive of the IAC-owned search site. And by using Ask.com’s advertising relationship with Google on the Lexico sites, the company should be able to increase the ad revenue.
Adding Lexico’s Web visitor count will increase Ask.com’s monthly visitors to 145 million, according to ComScore statistics, Safka said. “Overnight, our unique users will increase by 11 percent, which is outstanding,” he said.
Ask.com is part of Barry Diller’s IAC empire, which will soon break up into parts.
May 15th, 2008
News to know: Comcast-Plaxo; Icahn-Yahoo; Linux; Microsoft
Notable headlines:
Larry Dignan: Comcast buys Plaxo: Will social networking and TV fly?