Apple's newest social networking service has become a magnet (thus far) for spam (and bogus comments which is essentially the same thing...) Is it really any surprise as so many mediums within this space are subjected to the same nonsense (which means that they are no different regarding the simple fact that bots / people are prone to wasting their time and energies therein).
First the dust-up with Facebook; now this... What's next for Ping? Let's hope that it's not something more malicious like a virus that hits the iPhone (although the unfortunate reality is that with Android being hit recently with the wall-paper spy-ware scam anything is possible).
Google's Android OS continues to maintain a sustained charge into the smart phone space... which is good for all parties involved... most notably consumers who have more choices as a result. Meanwhile, Apple's juggernaut has slipped during the past year (as Android has gained market share) which is a troubling sign for Cupertino.
All told, competition within this space will keep driving innovation for both handset development as well as the creation of applications.
Look forward to more turbulence and change within this sector...
Ping continues to stumble out of the gates as it seems (almost) as if Apple's planning for the launch of this new service is / was haphazard at best...
Just what everyone needs... another social networking medium... Well, according to Apple this one is different; or is it really just another attempt by Cupertino to flank their rivals? Perhaps it is a bit of both; and/or maybe neither for that matter.
One thing is for certain: iTunes is increasingly becoming bloat-ware in and as far as that Apple keeps putting more and more in to said platform...
Quote of the Day: "Junk is the ideal product... the ultimate merchandise. No sales talk necessary. The client will crawl through a sewer and beg to buy." - William S. Burroughs.
Let's hope that the call for a global climate fund (focused specifically on said issue) is not too little / too late. Towards that end, a simply question (orientation) might / would best be: why not? With all that humanity spends on killing, maiming and destroying (which in terms of dollars is on the scale of orders of magnitude larger) a $100 billion climate fund (whilst still an incredibly large amount of money) pales in comparison to (for example) what America (alone) spends on military related costs per day / month / year, etc.
If you're like most consumers (particularly American) you like to shop. Moreover, it's also highly likely that you like to give too. If so; any given end-user now has a medium for doing so - via a downloadable application for their smart phone...
Simple; easy and functional... if volunteering and actively contributing (in person vs. virtually) to one's local community was only this easy! Nonetheless, getting people more involved (in whatever manner of speaking) is always a positive step in the right direction...
Quote of the Day: "Only one who devotes himself to a cause with his whole strength and soul can be a true master. For this reason mastery demands all of a person." - Albert Einstein.
Although caught (essentially) flat-footed within their own domestic market; S. Korean handset manufacturers have made a concentrated effort (which is on-going) at playing catch-up. The latest example of this is Samsung's Galaxy launch which has sold an impressive 1 million smart phones within the first 45 days of being launched in America (this is aside from the fact that the unit has also been a huge hit in their home nation).
Clearly, Android-powered phones are showing no shortage of challenging Apple's iPhone.
Google's continued push / entrance into the VoIP market clearly stands to both garner attention as well as (potentially) change the way that end-users apply this technology.
Today (supposedly) marks Dell's first attempt at releasing a 'smart' phone... Towards that end, three points come to mind: one) does the world really need another smart phone? Either way that anyone answers said question is largely irrelevant (as it really comes down to a matter of opinion regarding the unwashed masses and/or a heated technical debate amongst those who are savvy within this market segment).
The second point (which is really perplexing) is: why would any vendor release a 'new' handset with a version of an OS that is already 16 months old?! The challenge therein is with the manufacturers themselves (who are trying to use their respective UI as a differentiator as the market continues to burgeon with Android-powered hand-sets). In other words, if you have an iPhone and/or a Black Berry - it's pretty clear how the UI will be regarding any given end-users' experience. With Android; that's not the case due to early OS (features) functional limitations (which in all probability at that juncture warranted customizing the UI). However, Google has made vast improvements within this OS since it was initially released...
In conclusion, it also begs the question: at what price success is a custom skin more important than diluting the overall ecosystem?
For all that Apple's exclusive partner (AT&T) has been criticized (and rightly so) for suspect network service in major (US) metropolitan areas (San Francisco, LA, New York, etc.) if iPhone becomes available on Verizon who is to say that said carrier will be better? Granted, both claim to have superior networks; however, if concentrated / large data demands are placed on either one (within a period of time and/or in an on-going respect) it is possible that Verizon subscribers will face challenges with their service levels (including those existing non-iPhone end-users).
Like the old saying goes, "be careful for what you wish for" as one never knows how things turn out until they are actual fact vs. rumor or innuendo...
Roughly 500 million smart phones and $38 Billion in network operator revenue are projected to be generated throughout Asia-Pacific by 2015... This is a far cry from just 5% of total handset sales in 2009 being smart phones (by 2015 it is also estimated that over 1/2 of all new mobile devices sold will be smart phones).
Clearly, this translates into potential big money for manufacturers; telecommunications firms; and, application developers who stand to gain too via creating localized offerings (that will be quite varied due to the differences in market maturation / diversity throughout the whole of the region).
Granted, a lot can change within the new 5 years. However, if the past 3 years are any indication (since the introduction of the iPhone) anything is possible...
Mobile payments might be the next 'big-thing' in smart phone applications... in America. Granted, in much of Asia this is non-news; however, in the US this has the potential to not just make the developers a lot of money but to create greater convenience in a nation that has made such practically a high-art form.
Joining the soon-to-be list of 'me-too' plays; LG claims that their upcoming tablet will be better than iPad... for actually being 'useful.' Granted, that is not too outlandish of a statement (pun intended). Nevertheless, this is from a company that went from being a high-flying global (rising) star in the mobile space (due to selling high-volumes of low-end mobile handsets) to essentially getting caught flat-footed due to the simple fact that they were part of the lobby that blocked smart phones sales in their home country (S. Korea).
After their worst quarter in 8 years and a substantial decline in overall market share - they are scrambling to play catch up. Moreover, despite the fact that LG Display (an affiliate of LG Electronics) have been unable to keep up with the demand for iPad's (as they are supplying the screens for them) it's interesting that they are going to turn their attention to creating a rival device... in the midst of already not being able to meet their current production demands (which might equate to them attempting to capitalize on the Korean sense of loyalty to local brands via capturing this market before they get blown away akin to how they did once the iPhone was released in S. Korea).
The Beatles song of the aforementioned title will be beamed into space on Monday, February 4th in celebration of the 50th anniversary of NASA’s launch of the Explorer 1 Satellite. Other than Elvis, perhaps no other Pop Music icons have better stood the test of time than the Fab Four. Moreover, much of the technological advancements that are taken for granted today were a direct by-product of space exploration and the innovations of those involved... Convergence for a Converging World…
February 4, 2008 Google: Microsoft Deal Bad For Internet.
From the Associated Press:
SAN FRANCISCO - Google Inc. raised the specter of Microsoft Corp. using its proposed $42 billion acquisition of Yahoo Inc. to gain illegal control over the Internet, underscoring the online search leader's queasiness about its two biggest rivals teaming up.
The critical remarks, posted online Sunday by Google's top lawyer, represented the Mountain View-based company's first public reaction to Microsoft's unsolicited bid for Yahoo since the offer was announced Friday.
"Microsoft's hostile bid for Yahoo raises troubling questions," David Drummond, Google's chief legal officer, wrote. "This is about more than simply a financial transaction, one company taking over another. It's about preserving the underlying principles of the Internet: openness and innovation."
Google's opposition isn't a surprise, given that Microsoft views Yahoo as a crucial weapon in its battle to gain ground on Google in the Internet's booming search and advertising markets.
Redmond, Wash.-based Microsoft has been trying to depict a Yahoo takeover as a boon for both advertisers and consumers because the two companies together would be able to compete against Google more effectively.
But Google is painting a starkly different picture, asserting that Microsoft will be able to stifle innovation and leverage its dominating Windows operating system to set up personal computers so consumers are automatically steered to online services, such as e-mail and instant messaging, controlled by the world's largest software maker.
Google's chief executive, Eric Schmidt also called his counterpart at Yahoo late last week to offer help in frustrating the bid, according to a report on The Wall Street Journal's Web site Sunday, which cited anonymous people familiar with the matter. The help did not include a counterbid but may have included supporting other counterbids, or guaranteed revenue in exchange for an ad outsourcing agreement with Yahoo, the people said, according the newspaper.
AT&T Inc., Time Warner Inc. and News Corp. aren't planning to bid for Yahoo, the Journal said, citing the people familiar.
To help make its point, Google pointed to the way Microsoft previously used Windows to help extend the reach of its Web browser and other applications — a strategy that triggered a U.S. Justice Department lawsuit alleging the software maker illegally used its operating system to stifle competition. The dispute ended with a 2002 settlement that required Microsoft to abandon some of its past practices.
"Could Microsoft now attempt to exert the same sort of inappropriate and illegal influence over the Internet that it did with the PC?" Drummond wrote.
Brad Smith, Microsoft's general counsel, said preventing Microsoft from buying Yahoo would undermine competition by allowing Google to become even more dominant than it already is on the Internet
"Microsoft is committed to openness, innovation, and the protection of privacy on the Internet," Smith said. "We believe that the combination of Microsoft and Yahoo! will advance these goals."
If they get together, Microsoft and Yahoo would have about 16 percent of the worldwide Internet search market — still far behind Google's 62 percent share, according to comScore Media Metrix. But Microsoft and Yahoo already are far bigger in than Google in e-mail and instant messaging, and conceivably would be in a better position to squash rival services if they combined.
Illustrating the enormous stakes involved in a deal that could reshape the technology and media industries, Google and Microsoft are already debating the pros and cons before Yahoo has responded to the offer.
Yahoo so far has little to say except that its board will carefully examine Microsoft's bid — a process that "can take quite a bit of time," according to a message posted on the Sunnyvale-based company's Web site.
The review "will include evaluating all of the company's strategic alternatives, including maintaining Yahoo as an independent company," Yahoo said on its Web site.
Most analysts believe Yahoo will have little choice but to sell to Microsoft, with its stock price near a four-year low at the time of the bid and its profits falling since late 2006. When it was first announced, Microsoft's offer was 62 percent above Yahoo's market value — a premium analysts doubt any other suitor will be able to top.
If Yahoo accepts, antitrust regulators in both the United States and Europe are expected to begin an exhaustive review that some experts think could last a year. Microsoft believes it could get the necessary approvals to take over Yahoo late this year.
If nothing else, Google probably will try to raise enough alarms about the Microsoft-Yahoo deal to delay its approval for as long as possible. By doing so, Google would have more time to draw up plans to counteract the combination.
Google also is borrowing a page from Microsoft's book by urging antitrust regulators to take a hard look at the proposed marriage between its two rivals.
Just days after Google struck a $3.1 billion deal to buy online ad service DoubleClick Inc. last year, Microsoft began lobbying regulators to block the transaction. U.S. regulators blessed Google's DoubleClick acquisition late last year after an eight-month review, but the antitrust inquiry in Europe remains open.
February 4, 2008 Yahoo is Microsoft's War Cry Against Google.
From the New York Times:
In moving to buy Yahoo, Microsoft may be firing the final shot of the last war.
That one was over Internet search advertising, a booming category in which both Microsoft and Yahoo were humble and distant also-rans behind Google.
Microsoft may see Yahoo as its last best chance to catch up. But for all its size and ambition, the bid has not been greeted with a surge of enthusiasm. That may be because buying rather than building is regarded as counter to the reinvention culture of Silicon Valley, where investment money and brain power are tuned to anticipating the next big thing rather than chasing the last one.
What is the next battle? Maybe it will be a low-power microprocessor, code-named Silverthorne, that Intel plans to announce Monday. It is designed for a new wave of hand-held wireless devices that Silicon Valley hopes will touch off the next generation of software and Internet innovation.
Or maybe it will be something else entirely.
No one really knows, of course, but gambling on the future is the essence of Silicon Valley. Everyone chases the next big thing, knowing it could very well be the wrong thing. And those who guess wrong risk their survival.
That is why, in this silicon-centric economy, front-runners do not stay front-runners for long.
The big names of the 1980s -- Commodore, Tandem, Digital Equipment and MicroPro -- are in a graveyard shared by the high-fliers of the 1990s -- the At Home Network, Netscape and Infoseek, to name a few.
Now Yahoo, founded by Stanford graduate students who became media darlings and instant billionaires after an exhilarating initial public offering of stock, may be the next to disappear.
And Yahoo, which is based in Sunnyvale, Calif., is only 13 years old. Microsoft wants to buy the company for $42 billion as its way to compete with Google, the hot company of this decade, which was also founded by Stanford graduate students who became media darlings and instant billionaires after an exhilarating initial public offering.
"This is the very nature of the Valley," said Jim Breyer, a partner at the Silicon Valley venture capital firm Accel Partners. "After very strong growth, businesses by definition start to slow as competition increases and young creative startups begin to attack the incumbents."
Austrian economist Joseph Alois Schumpeter had a name for this principle of capitalism: creative destruction. Perhaps nowhere does that concept play out more dramatically -- and more rapidly -- than in Silicon Valley, where innovation unleashes a force that creates and destroys, over and over.
Microsoft, at the still-young age of 32, is making its largest acquisition because it, too, is affected by this force. Founded in 1975, Microsoft has had a longer run than most technology companies largely because it became very good at chasing the next big thing: an operating system, point-and-click computing, software for servers, Web services, video game and music players, and, most recently, Internet search and online advertising.
It may not have always been technological innovation that gave Microsoft the edge. It has been frequently criticized for me-tooism and for getting it right the third time. Sometimes it seemed that marketing skill and bullying were as much keys to its success.
Microsoft won huge business battles, starting with its domination of personal-computer software against Apple during the 1980s. A decade later, it made quick work of Netscape Communications, which popularized Web browsing.
While Microsoft remains profitable because of its lock on desktop software, its efforts to dislodge the Valley's leading third-generation Internet company, Google, have so far failed.
Google's central innovation, Internet search, has confounded Microsoft, despite investing billions of dollars in both technology development and numerous smaller acquisitions. Internet technology has overtaken the PC desktop as the center of the action, as people increasingly view the computer as merely a doorway to their virtual world.
Google, based in Mountain View, Calif., has been setting up giant data centers around the world.
It has unleashed the power of free -- not a new idea for the Valley -- to endear itself to a new generation of computer users with services they find they cannot live without, like e-mail, digital video and social networking.
Now Microsoft is trying to make up ground by buying what it hasn't been able to build. To many technologists and entrepreneurs, the deal, rather than indicating any imminent threat to the Valley's startup culture or suggesting that the region might go the way of Detroit, underscores its health.
There is a sense among investors that Microsoft, as a more effective counterweight to Google, might actually spur innovation in the Valley.
"When Microsoft was in the ascendancy, there were whole areas of investment that were of less interest to investors," said William R. Hearst III, an affiliated partner with the venture capital firm Kleiner Perkins Caufield & Byers. "Now you could enter a new area and people will think that maybe one of the two colossuses will be interested in acquiring your startup."
Innovation has been the driving force of Silicon Valley, and the results over the last quarter-century have been stunning. More than a billion personal computers are in use around the world. Cell phones are in the hands of 3 billion people. The next generation of mobile computers appears destined to reach another 2 billion people in just six more years.
The productivity gains from these devices have driven the world's economy to faster economic growth and a higher standard of living for more of the world's population.
If Microsoft acquires Yahoo, some executives said, the question is whether it will shake its obsession with catching Google and instead look to the next generation of the Internet, even if it threatens Microsoft's dominant position in PC software.
Google's central innovation, Internet search, has confounded Microsoft, despite investing billions of dollars in both technology development and numerous smaller acquisitions. Internet technology has overtaken the PC desktop as the center of the action, as people increasingly view the computer as merely a doorway to their virtual world.
Google, based in Mountain View, Calif., has been setting up giant data centers around the world.
It has unleashed the power of free -- not a new idea for the Valley -- to endear itself to a new generation of computer users with services they find they cannot live without, like e-mail, digital video and social networking.
Now Microsoft is trying to make up ground by buying what it hasn't been able to build. To many technologists and entrepreneurs, the deal, rather than indicating any imminent threat to the Valley's startup culture or suggesting that the region might go the way of Detroit, underscores its health.
There is a sense among investors that Microsoft, as a more effective counterweight to Google, might actually spur innovation in the Valley.
"When Microsoft was in the ascendancy, there were whole areas of investment that were of less interest to investors," said William R. Hearst III, an affiliated partner with the venture capital firm Kleiner Perkins Caufield & Byers. "Now you could enter a new area and people will think that maybe one of the two colossuses will be interested in acquiring your startup."
Innovation has been the driving force of Silicon Valley, and the results over the last quarter-century have been stunning. More than a billion personal computers are in use around the world. Cell phones are in the hands of 3 billion people. The next generation of mobile computers appears destined to reach another 2 billion people in just six more years.
The productivity gains from these devices have driven the world's economy to faster economic growth and a higher standard of living for more of the world's population.
If Microsoft acquires Yahoo, some executives said, the question is whether it will shake its obsession with catching Google and instead look to the next generation of the Internet, even if it threatens Microsoft's dominant position in PC software.
February 4, 2008 Yahoo Sale Could Be Bad for Minnows.
From the New York Times:
SAN FRANCISCO — FOR decades, Silicon Valley has been the land of eternal optimism and high anxiety, traits that pitch into overdrive anytime a seismic business event washes across the corporate and entrepreneurial landscape here — like, for example, Microsoft’s blockbuster $45 billion bid for Yahoo on Friday.
The legions of high-tech entrepreneurs who have set up camp here with clever ideas, a willingness to scramble for financing and the energy to weather round-the-clock days have typically tethered their dreams to a singular outcome: getting fabulously rich by selling to one of the three Internet giants, Microsoft, Google or Yahoo.
But if Microsoft’s takeover bid for Yahoo succeeds, that calculus becomes more harrowing because of a simple reality: the field of large, lushly endowed suitors will narrow by one. And that is a fact sure to jangle nerves already strained by growing fears of an economic recession.
“From a start-up and investor perspective, if there are more companies trying to vie for the same businesses, there are more exits,” said Bismarck Lepe, a former Google employee and now chief executive of Ooyala, a year-old video host and advertising company. “It’s not great for competition if there are only two acquisition targets instead of three.”
To be sure, a Microsoft-Yahoo deal could be good for Silicon Valley, funneling money into the economy and triggering a round of copycat deals as other players like Google and the News Corporation look to keep up.
But Microsoft is buying Yahoo because it has steadily fallen behind Google in the lucrative online search market and because the future of computing may not be forever linked to the desktop market that Microsoft now dominates. Apparently unable to keep up with Google through internal efforts, the legendary software giant in Redmond, Wash., has gone outside to solve its problems by trying to buy Yahoo.
So the rationale for Friday’s proposed mega-deal is based on Microsoft’s own particular corporate needs and may not be a harbinger of rampant deal-making in the Valley.
Moreover, with an economic recession looming nationally, the unsolicited bid for Yahoo comes at a difficult time for the normally cocksure world of high tech. Visibly, much of the region maintains an almost obstinate belief that it can weather any economic storm that emerges. Consumers are still flocking online, advertising is following, and the current generation of start-ups has been built frugally — with lessons from the dot-com bust of several years ago still very much in mind.
Venture capitalists also raised nearly $35 billion last year, more than at any other time since before the dot-com crash, according to the National Venture Capital Association. Those financiers are ready to make bets on countless entrepreneurs who hope to build the next Google, Facebook or YouTube.
But as the stock market lolls and an outsider, Microsoft, bids to gobble up a company that once was one of Silicon Valley’s crown jewels, the region’s innovators and corporate stewards appear to be growing ever more anxious. That trait is most visible in the top executives at public companies whose eyes are trained on parallel declines in consumer confidence and public equities.
Shares of Google had dropped nearly 20 percent since the beginning of the year — and then they fell an additional 8.6 percent on Friday after Microsoft made the play for Yahoo. Apple has dropped 33 percent since the start of the year. That was enough to prompt Steven P. Jobs, Apple’s chief executive, to send a reassuring memo to options-sick employees last week that concluded: “Hang in there.”
Many in the typically overconfident venture capital world say it is foolish to believe the technology sector is somehow sheltered from the storm.
“All markets are linked,” says Peter Rip, a general partner at Crosslink Capital, adding that the pain might trickle down from the public markets to large private companies and eventually to smaller start-ups. “We just asked every one of our companies to take a sharp pencil to their hiring plan this year. It is going to be a bumpy ride for a while.”
IN a blog posting this week titled “Downturn, Now What?,” Will Price, a partner at the San Francisco venture capital firm Hummer Winblad, said the recession could punish technology investors for succumbing yet again to investment fads and high valuations for companies without proven business models.
He calls these companies “Field of Dreams” start-ups, because their entrepreneurs believed that if they built popular online services, advertisers would inevitably come. Now that might not necessarily be the case.
“There’s been a suspension of belief” at Internet companies without a proven way to earn money “that the market is going to let you off the hook,” Mr. Price said. “These companies are going to have a hard time getting past experimental interest from advertisers when they want to start attracting really big spending.”
MOST Valley residents, including even the most pessimistic venture capitalists, are quick to say that the Internet economy would be in an enviable position if there were a recession. Mutual funds, media companies and private equity firms are all trying to get in on the Internet action. The online advertising market is booming.
This is where true believers are likely to ward off recessionary fear with two numbers: 21 and 7. Twenty-one percent of the average American’s media-consumption time is spent online, analysts say, yet only 7 percent of all advertising is online. The hope is that advertising will inevitably shift online and close this gap, whatever the economic outlook.
“Consumer eyeballs are flooding from traditional media to the Internet,” said Seth Sternberg, chief executive of the online chat company Meebo. “Recession or not, big companies have to figure out how to do really great brand advertising on the Web to keep their brands in front of users.”
For that reason, many Internet executives say that traditional media companies — not Web properties — are likely to be the first victims of any advertising pullback. “If our advertisers cut their marketing budget by 15 or 20 percent, that will hurt,” said John Battelle, who ran the Industry Standard magazine during the first dot-com boom and now runs the online ad network Federated Media. (The New York Times Company has invested in Federated.) “But my guess is that they will cut it first in print or TV and not online.”
Still, the dot-com bust — and its destructive reverberations — continues to cast a shadow over even the most optimistic Internet evangelist. In 2000, as the stock market cratered and fear spread, venture capitalists pulled the plug on hundreds of start-ups and wrote off millions of dollars in losses.
Frank Addante’s online advertising company at that time, L90, went public and reached a tantalizing market capitalization of $500 million before the dot-com bubble popped and L90 was forced to sell its technology to a rival and file for bankruptcy protection.
Not surprisingly, Mr. Addante is keeping one eye on the economy.
Now the chief executive of another online advertising company, the Rubicon Project, Mr. Addante, like other entrepreneurs, is confident that the tech sector would survive an economic downturn.
But he is also hedging his bets. Earlier this month, the company raised $21 million in venture capital before it needed a cash infusion, in part, Mr. Addante said, because such capital may not be available in the coming year.
“When money is on the table and it’s a decent deal, sometimes you have to go and take it,” he said. “You never know what’s going to happen in the markets.”
LIKE Mr. Addante, Max Levchin, the chief executive of Slide, says that the United States is on the road to recession and that Silicon Valley start-ups could be headed for a venture capital-mandated round of belt tightening. So Mr. Levchin, who co-founded PayPal, a company that successfully weathered the dot-com crash, decided to take the money while the going was good: He recently raised $55 million in additional financing for Slide, a company that makes video- and photo-sharing tools.
“We determined that if we were going to raise money, we would have a much easier time of it at the end of 2007 than at any time during 2008,” he said. “I don’t think I was the only guy in town who thought that.”
Mr. Lepe of Ooyala recalls his drives to Mountain View, Calif., in 2001, when he would see a new empty billboard off Highway 101 each week as pessimism spread through the community.
The lesson: Economic downturns have a way of fostering panic and transforming a community’s collective consciousness. “So much in the Valley — whether a company gets funded or not — happens on gut instinct,” Mr. Lepe said. “If someone’s house isn’t being sold and they can’t go out and buy their yacht, it does have an impact on their psychology.”
And what psychological impact could a potential Microsoft-Yahoo deal have on Silicon Valley’s heady business environment? While he worries about the reduced number of potential acquirers, Mr. Lepe also speculates it could have a positive outcome, if it stimulates a flurry of deal-making in the industry.
But not many entrepreneurs are holding their breath — for a new round of deals or for a sea change in the current business climate — because of a possible megamerger of Microsoft and Yahoo. Mr. Sternberg of Meebo said a marriage of the two Internet titans could benefit start-ups like his if Yahoo and Microsoft were able to deliver on the promise of a more efficient online advertising system. But that could be years off.
“Does this impact our world overnight? Definitely not,” he said, “at least as far as I can see.”
Clearly, this is BIG news in the industry. Moreover, the potential positives and negatives of the deal will be deliberated and discussed over the coming days... CONVERGENCE IN A CONVERGING WORLD...
For now, here's the letter itself:
Board of Directors Yahoo! Inc. 701 First Avenue Sunnyvale, CA 94089 Attention: Roy Bostock, Chairman Attention: Jerry Yang, Chief Executive Officer
Dear Members of the Board:
I am writing on behalf of the Board of Directors of Microsoft to make a proposal for a business combination of Microsoft and Yahoo!. Under our proposal, Microsoft would acquire all of the outstanding shares of Yahoo! common stock for per share consideration of $31 based on Microsoft's closing share price on January 31, 2008, payable in the form of $31 in cash or 0.9509 of a share of Microsoft common stock. Microsoft would provide each Yahoo! shareholder with the ability to choose whether to receive the consideration in cash or Microsoft common stock, subject to pro-ration so that in the aggregate one-half of the Yahoo! common shares will be exchanged for shares of Microsoft common stock and one-half of the Yahoo! common shares will be converted into the right to receive cash. Our proposal is not subject to any financing condition.
Our proposal represents a 62% premium above the closing price of Yahoo! common stock of $19.18 on January 31, 2008. The implied premium for the operating assets of the company clearly is considerably greater when adjusted for the minority, non-controlled assets and cash. By whatever financial measure you use - EBITDA, free cash flow, operating cash flow, net income, or analyst target prices - this proposal represents a compelling value realization event for your shareholders.
We believe that Microsoft common stock represents a very attractive investment opportunity for Yahoo!'s shareholders. Microsoft has generated revenue growth of 15%, earnings growth of 26%, and a return on equity of 35% on average for the last three years. Microsoft's share price has generated shareholder returns of 8% during the last one year period and 28% during the last three year period, significantly outperforming the S&P 500. It is our view that Microsoft has significant potential upside given the continued solid growth in our core businesses, the recent launch of Windows Vista, and other strategic initiatives.
Microsoft's consistent belief has been that the combination of Microsoft and Yahoo! clearly represents the best way to deliver maximum value to our respective shareholders, as well as create a more efficient and competitive company that would provide greater value and service to our customers. In late 2006 and early 2007, we jointly explored a broad range of ways in which our two companies might work together. These discussions were based on a vision that the online businesses of Microsoft and Yahoo! should be aligned in some way to create a more effective competitor in the online marketplace. We discussed a number of alternatives ranging from commercial partnerships to a merger proposal, which you rejected. While a commercial partnership may have made sense at one time, Microsoft believes that the only alternative now is the combination of Microsoft and Yahoo! that we are proposing.
In February 2007, I received a letter from your Chairman indicating the view of the Yahoo! Board that "now is not the right time from the perspective of our shareholders to enter into discussions regarding an acquisition transaction." According to that letter, the principal reason for this view was the Yahoo! Board's confidence in the "potential upside" if management successfully executed on a reformulated strategy based on certain operational initiatives, such as Project Panama, and a significant organizational realignment. A year has gone by, and the competitive situation has not improved.
While online advertising growth continues, there are significant benefits of scale in advertising platform economics, in capital costs for search index build-out, and in research and development, making this a time of industry consolidation and convergence. Today, the market is increasingly dominated by one player who is consolidating its dominance through acquisition. Together, Microsoft and Yahoo! can offer a credible alternative for consumers, advertisers, and publishers. Synergies of this combination fall into four areas:
-- Scale economics: This combination enables synergies related to scale economics of the advertising platform where today there is only one competitor at scale. This includes synergies across both search and non-search related advertising that will strengthen the value proposition to both advertisers and publishers. Additionally, the combination allows us to consolidate capital spending. -- Expanded R&D capacity: The combined talent of our engineering resources can be focused on R&D priorities such as a single search index and single advertising platform. Together we can unleash new levels of innovation, delivering enhanced user experiences, breakthroughs in search, and new advertising platform capabilities. Many of these breakthroughs are a function of an engineering scale that today neither of our companies has on its own. -- Operational efficiencies: Eliminating redundant infrastructure and duplicative operating costs will improve the financial performance of the combined entity. -- Emerging user experiences: Our combined ability to focus engineering resources that drive innovation in emerging scenarios such as video, mobile services, online commerce, social media, and social platforms is greatly enhanced.
We would value the opportunity to further discuss with you how to optimize the integration of our respective businesses to create a leading global technology company with exceptional display and search advertising capabilities. You should also be aware that we intend to offer significant retention packages to your engineers, key leaders and employees across all disciplines.
We have dedicated considerable time and resources to an analysis of a potential transaction and are confident that the combination will receive all necessary regulatory approvals. We look forward to discussing this with you, and both our internal legal team and outside counsel are available to meet with your counsel at their earliest convenience.
Our proposal is subject to the negotiation of a definitive merger agreement and our having the opportunity to conduct certain limited and confirmatory due diligence. In addition, because a portion of the aggregate merger consideration would consist of Microsoft common stock, we would provide Yahoo! the opportunity to conduct appropriate limited due diligence with respect to Microsoft. We are prepared to deliver a draft merger agreement to you and begin discussions immediately.
In light of the significance of this proposal to your shareholders and ours, as well as the potential for selective disclosures, our intention is to publicly release the text of this letter tomorrow morning.
Due to the importance of these discussions and the value represented by our proposal, we expect the Yahoo! Board to engage in a full review of our proposal. My leadership team and I would be happy to make ourselves available to meet with you and your Board at your earliest convenience. Depending on the nature of your response, Microsoft reserves the right to pursue all necessary steps to ensure that Yahoo!'s shareholders are provided with the opportunity to realize the value inherent in our proposal.
We believe this proposal represents a unique opportunity to create significant value for Yahoo!'s shareholders and employees, and the combined company will be better positioned to provide an enhanced value proposition to users and advertisers. We hope that you and your Board share our enthusiasm, and we look forward to a prompt and favorable reply.
Sincerely yours,
Steven A. Ballmer Chief Executive Officer Microsoft Corporation
Here's an interesting story from the Economist comparing and contrasting China’s Internet reality, trends, and usage.
ONE of the more striking end-of-year statistics pumped out recently by the Chinese government was an update on the number of internet users in the country, which had reached 210m. It is a staggering figure, up by more than 50% on the previous year and more than three times the number for India, the emerging Asian giant with which China is most often compared. Within a few months, according to Morgan Stanley, an investment bank, China will have more internet users than America, the current leader. And because the proportion of the population using the internet is so low, at just 16%, rapid growth is likely to continue for some time.
That such a big, increasingly wealthy and technologically adept country has embraced the internet is no surprise, but it has done so in a very different way from other countries. That is in large part the result of the government's historically repressive approach towards information and entertainment. News is censored, television is controlled by the state, and bookshops and cinemas, shuttered during the Cultural Revolution, are still scarce.
The internet itself is also tightly controlled. Access to many foreign websites (such as Wikipedia) is restricted, and Google's Chinese site filters its results to exclude politically sensitive material. New rules governing online video came into force this week. Electronic retailing is in its infancy, thanks to an unwieldy government-controlled payment system, so most shopping is still done in person. The attempt by eBay, the world's leading online auction site, to enter the Chinese market was a flop. Alibaba, a site often described as the eBay of China, is in fact more an electronic yellow pages, helping buyers find sellers, than an online auction room.
The Chinese way
Yet it is all these limitations, paradoxically, that make the internet so popular in China. In the West online activities have transformed existing businesses and created new ones; in China, by contrast, the internet fills gaps and provides what is unavailable elsewhere, particularly for young people. More than 70% of Chinese internet users are under 30, precisely the opposite of America, and there is enormous pent-up demand for entertainment, amusement and social interaction, says Richard Ji, an analyst at Morgan Stanley. Rich rewards await those entrepreneurial internet companies able to meet that demand and establish themselves in the market: operating margins for leading internet firms are 28% in China, compared with 15% in America. And internet companies' share prices have shot up, with their collective market capitalisation nearly doubling every year since 2003 to reach over $50 billion today.
So what is the internet used for in China? Its most obvious use is to distribute free pirated films, television shows and music. Even though China's censors do an excellent job of restricting access to content that might cause political problems, they are strangely unable to stem the flow of pirated foreign media. On December 30th an appeals court in Beijing ruled in favour of Baidu, China's leading search engine, which had been accused by the world's big record companies of copyright violation by providing links to pirated music files. Even so, piracy is starting to worry the government, not least because the availability of free foreign content is holding back the development of the domestic media industry. But for the time being, the free-for-all continues.
When it comes to making money online, the biggest market involves the delivery of mobile-internet content to mobile phones. With over half a billion mobile-phone users, China has more subscribers than America, Japan, Germany and Britain combined, and more than half of them use their phones to buy ringtones, jokes and pictures from mobile-internet portals such as KongZhong and Tom Online. Each download costs a few cents, most of which goes to the portal, but the mobile operators then make money as subscribers send jokes and pictures to each other. It all sounds trivial, but a few cents here and there multiplied by hundreds of millions of users soon add up. The ringtone from a hit song, “Mice Love Rice”, generated over $10m in sales in 2005, for example.
Another big field is online multiplayer games, which have become so popular that the government has started to worry about their impact on adults' productivity and children's education. Import restrictions and fear of piracy mean that the big foreign console-makers—Sony, Nintendo and Microsoft—have not made much headway in China. Instead, a different model has emerged, based around PC games played online. Generally the game itself is given away, so piracy is not a problem, but players pay a subscription to play, and may also buy in-game add-ons such as accessories for their characters. Big providers such as NetEase and Shanda have millions of customers for games such as “Fantasy Westward Journey”, a cartoon game for children, and “World of Legend”, for teenagers and adults.
Although there are tight constraints on the provision of hard news, internet sites such as Sina and Sohu provide a steady supply of gossip, features, dabs of propaganda and slightly salacious stories and photos, and are constantly testing the boundaries of what is permissible. Video of America's professional basketball league and English football games is also popular, and can be packaged with streaming advertisements, another emerging business in China.
The most dynamic area, and the hardest for outsiders to understand, is that of online communities, many of which are run by a company named Tencent. Its site offers an instant-messaging service and a MySpace-like social networking site, among other things. In each case the basic services are free, but users pay for add-ons (such as new backgrounds for their home-pages or more storage space). Often, says Mr. Ji, the members of these communities are people who, because of the single-child policy, have no siblings and are searching for virtual friendships. For them and for many users in China, the internet is not truly a worldwide web: it is only as wide as China. But China's internet community is evidently a world unto itself.
January 28, 2008 A Quarter of a Billion to Make Computing Easier.
News on Cisco’s new Nexus 7000 product was in CNNMoney, the WSJ, and, this excerpt from Forbes today: In his latest book, tech pundit Nicholas Carr put a name on a trend that's transforming information technology: As the world becomes more networked, he points out, computing power is undergoing "the Big Switch," moving off of desktops and into massive data centers, where it's cheaper and more efficient. It will be interesting to see if this is Cisco's biggest launch since 1993 when network switches were first invented... $250 million in R&D is a big bet that it will be…
January 26, 2008 I Call You Up All Night and Day...
Congrats are in order to Tokiva (another entrant into the increasingly crowded field of mobile applications blurring the lines between VoIP and Telephony) for their public beta launch earlier this month. Acquiring nearly 3/4 of a million users since last September is an impressive number.
I've uploaded a Voice 2.0 competitive matrix (on my Portfolio Samples page) with a sample of product features offered between VoIP and mobile applications. As Voice 2.0 matures it is becoming clear that the convergence between Telephony and VoIP is closing. Towards that end, the Voice 2.0 mobile application that lands an OEM deal where their application is embedded within a handset stands to gain a distinct advantage.
The combination of Voice 2.0’s maturation, globalization and consumer demands for cheaper calling rates and 24/7 mobile accessibility have set the groundwork for an exciting period of innovation and adoption within this space.
