Microsoft and Yahoo are strange companies in that neither has anything going on from a marketing strategy perspective. Outside of the Windows franchise, both are basically businesses built on hope and prayer.
Witness the recent announcements from the Redmond krewe. Let’s start with the write off of $6.2 billion from Microsoft’s $6.3 billion May 2007 acquisition of aQuantive (which we blasted here in late 2008). We’re guessing the $100 million that MSFT extracted as the final “value” in this deal was the intellectual property related to aQuantive’s software – which, oddly enough, is where Microsoft makes all its money.
And just last week, the “fool no one” tie-up between Microsoft and NBC News – aka, MSNBC – was undone. After 16 years of pain and suffering (especially for readers and viewers), the “value” in the separation amounted to all of $300 million for MSFT ($20 million per year, on average, if you’re keeping score at home).
But that wasn’t the only “news,” if you will. Rather than walk away from something it had no business being in in the first place, Microsoft pledged to LAUNCH ITS OWN NEWS CHANNEL. As if the world needs another web-based news site. More money down the drain.
Finally, to prove how it continues to flush good money after bad, at the close of business tomorrow (Thursday), Microsoft will announce its Q4-2012 financial results. We’ve detailed in prior posts how MSFT has lost $2 billion in operating “income” in its Online Services Division every year for the past three years.
Tomorrow’s results will surely confirm a fourth straight year of $2 billion lost. We are so certain that we predict here and now that Microsoft’s Q4 loss in Online Services will be $462 million.
Net net: Mister Softee has no business being on the Internet. But management still hasn’t gotten the email.
Meanwhile, over at Yahoo, an acquisition target of Microsoft’s in 2008, shareholders have watched their stock stay pinned to the $15 level since 2009. That’s because Yahoo is not a growth company – revenues come in essentially flat year over year…although, and unlike Microsoft’s Online Services Division, Yahoo does make a profit.
Still, the sum of Yahoo’s parts are less than the whole. A billion dollars in marketing spend would do nothing for this company. Not even $6.2 billion would.
So here we are, awash now in the analysis of this week’s appointment of Yahoo’s millionth CEO. Marissa Mayer is too young, too female, too engineer, too pregnant, blah blah blah. Analysis that is naïve and lacking in intellect.
Only Mayer and one Yahoo board member know what she has been asked to do (and now half a dozen Lairig Marketing readers know too). As a “product person,” she will perfect the 30% of Yahoo worth keeping. The fire sale on the rest will begin later this year.
And once Mayer is near done, completing a task akin to that of Steve Jobs, the new and polished Yahoo will be way undervalued at $15 a share. Merger fever will follow.
And about a year from now, Yahoo will end up, unwittingly, in the hands of – yep, you guessed it – Microsoft.