Kara Swisher

Recent Posts by Kara Swisher

Steve Ballmer Hoo-Ha Reveals Yahoo Nightmare Scenario

yahoo

Could Yahoo ever become a takeover target?

This kind of patently annoying answer from a CEO could certainly help fuel such a scenario–this time in an interview Microsoft head Steve Ballmer had yesterday with Charlie Rose:

Rose: Are you in talks to acquire Yahoo?
Ballmer: If I were, I wouldn’t say anything, and if I weren’t, I wouldn’t say anything.

Translation for those who don’t speak corporate hoo-ha: There were talks. They did not work out as yet. But we thought we could still keep Yahoo in play all by ourselves by being vague.

It’s a technique perfected, in this case, by the master of this particular deal-making game, Rupert Murdoch, who put an $8 billion value on his MySpace property by floating the idea of trading a 25% stake of Yahoo for MySpace in an earlier interview with Time magazine:

But as MySpace showed signs of reaching saturation, Murdoch began very preliminary, exploratory talks about trading the site for 25% or more of Yahoo. ‘Terry Semel was enthusiastic about it,’ he says of the then Yahoo CEO. ‘We were looking to see if it was a good idea. I wasn’t sure.’ ”

It is all very interesting in a top-level kind of way at this point, as I doubt new CEO Jerry Yang, who is ferreted away working on a master plan to fix Yahoo right now, has any intention of selling Yahoo before he is done with his top-to-bottom evaluation of the company, even if a sale is the right option in the end.

down arrow

He might not have a choice, though, as a rival Web exec pointed out to me the other day, noting that the downturn in the stock market, helped by the continued speculation and goosing of the rumors of a Yahoo sale, could spell trouble for the Internet portal.

Why?

If the market continues to decline, bringing down the economy, even fast-growing online ad sales will surely take a hit. His theory went that if Yahoo has a weak quarter or two, its shares–already down at lows not seen for more than three years–could get sliced and diced further.

Some think Yahoo is currently not as much of a bargain at about $23 a share now, especially given its turnaround status. Still, its market value remains a lofty $31 billion.

But what if the price to own Yahoo–hit hard by economic forces it could not overcome, as it sought to heal itself–declined to $15 billion?

Corporate anti-takeover measures notwithstanding, of course, that would then make it a screaming buy for players like News Corp., Microsoft and even Google. And that leaves out more rapacious private equity funds, who would surely jump into a race to buy a company that still has gigantic traffic, enormous brand equity and a spate of terrific online properties.

Former analyst Henry Blodget had his own interesting take in a recent piece about the possible recessionary impact on both Google and Yahoo. While Google’s Bad and Ugly scenarios include flattened revenue and a huge drop in operating profits, Yahoo faces an even more dire landscape.

Writes Blodget:

For Yahoo, the situation is scarier, because the company is growing slowly even now. In our GOOD scenario, revenue growth slows to 5%, as do expenses. In this case, operating profit grows slightly. In our BAD scenario, revenue drops 5% and expenses stay flat, cutting the operating margin and operating profit nearly in half (this is perfectly plausible). In our UGLY scenario, revenue drops 20% and expenses stay flat–and suddenly the company loses $600 million a year.”

Although Blodget might be ramping up the volume a bit too much here, it’s always good to be mindful of the worst-case scenario.

Please see this disclosure related to me and Google.


Latest Video

View all videos »

Search »

When AllThingsD began, we told readers we were aiming to present a fusion of new-media timeliness and energy with old-media standards for quality and ethics. And we hope you agree that we’ve done that.

— Kara Swisher and Walt Mossberg, in their farewell D post