Citi’s Mahaney Says Microsoft/Yahoo Merger Still 15% Likely

I said earlier that Yahoo closed down 15% on the Frankfurt Stock Exchange. Its the same company, so clearly the market values the company down 15% without the Microsoft deal on the table. Doesn’t it make sense that investors in the US have the same expectation - surely there are some arbitrage opportunities if that is not the case. Not sure - maybe I’ve been spending too much time with the kids on the the video

Last he said Microsoft-Yahoo deal was 60% possible, now he says it is 15% possible.

Public is out there throwing darts at the board, I don’t throw darts at a board, i bet on sure things - Wall Street.

Mark Mahaney, you are public, you are throwing darts at a board.

Mike - where do they get 15% chance of merger? That kind of feels like 64% pregnant.

Cheers - Eric

Microsoft will get quite a deal.

I think If Yahoo makes a deal with Google, then MS is will not come back and make an offer. such a deal with google will make yahoo an undesirable for MS (as ballmer noted in his response to yahoo).

Isn’t this the same guy who said a week ago that there was a 10 percent chance of Microsoft walking away from the deal? Fool me once…

And his assertion that Microsoft needs Yahoo is hardly insightful. Hey, Mahaney, thanks for joining us in 2008. We’ve all known that for many years now - certainly at least when MS came out with Live. Or at least the day after Live was announced when we finally stopped laughing.

That’s like saying General Electric needs AOL. We’d all realize that they are venturing into a market they know nothing about.

I swear this world is upside down when we have Arby’s buying Wendy’s so that, uh, Arby’s can survive. Thanks to institutional investors who are bullish and have the depth perception of three months (and no memory of history), we are selling our birthrights to companies that neither deserve them - nor able to improve them. They simple absorb good people and technologies for their own survival and short-term gains for investors (read: mutual funds).

As I’ve stated many times, Yahoo is #2 in Search and Online Advertising. They have not failed at anything. And they are #1 in most other online indications.

Meanwhile, Microsoft has done nothing BUT fail the past five years - except for Halo and XBox 360 and oddball technologies that they’ve yet to release into the wild (cute little $5k Surface thing, PhotoSynth, etc).

IBM needs to buy Microsoft, kill Vista and re-release and update XP, send Ballmer home, sell XBox to Electronic Arts, and put Office 2007 on the web (fully) before 2010 - or else it’s all over folks. Buying Yahoo won’t save Microsoft in the long run - it will just kill Yahoo.

Everyone realizes that - except Mahaney. But I think he enjoys the publicity (some might say “free publicity” - thanks T/C!) of throwing out ridiculous and unsupportable predictions about the future. Makes him worse than even the best sports commentator during the Playoffs.

I don’t speak for everyone, but I for one could care less what some suit on Wall Street thinks. What does Arrington, Dvorak, Gates, etc., think? Not CitiGroup.

BTW, I’m sure Mark is a great guy. I can tell just by the names he gave his kids. I just think he’s overly caught up in the money-driven environment of his workplace. Being hyped by T/C probably isn’t helping him. Besides, Yang and Ballmer are hardly going to listen to him (or anyone else at CitiGroup) in deciding what to do.

i guess he’s been right all along though so we should listen to him. he said previously there was a 10% chance of it not going through and he was totally right on that.

I rate Mark’s weighted average price of $26 as lower. His MS merger estimation includes a built-in price per YHOO share of $35. The chances of MS returning with a bid of $35/share at some distant point in the future is really suspect.

If YHOO revenues are flat over time, the stock will further recede as investors expectations of MS returning with an offer worth as much as the previous one will slowly erode.

How about another bet: chances of Yang remaining as CEO at Yahoo over the next year?

Let’s assume Yahoo fires Jerry Yang. What are the likely outcomes?

a) Some figurehead takes over and begs Ballmer to come back to the table. MS buys Yahoo for a pittance. Nice job, Yahoo board

b) A new CEO with the same plan as Jerry Yang takes over. The board just wasted critical time and nothing changed.

c) A new CEO with a different plan comes in. This would have the same negative impact as (b)

Yahoo can’t afford to waste time. They have to execute and they have to execute really fast with everything they’ve got. Firing the CEO at this point would be suicide.

I love percentage estimates!

“The doctor said there’s a 50 / 50 chance he’ll survive. But there’s only a 10% chance of that.” - Naked Gun

Yahoo with M$ will make a nice company.. Y! has done a lot to the opensource world, and Y! culture when married with M$ will make M$ a better company.

I don’t understand why analysts would disclosed %? Do people actually use these % to decide their portfolios? Are these % calculated? Or is there a % genie that i need to make friends with?

If he says 15% based on his track record I guess that means 85%.

I disagreed with his previous analysis. Nice to see the Wall Street crowd isn’t any smarter, just paid better.

Here’s what I said about his analysis last week:

http://www.bestcashcow.com/tec.....oft-google

@Lawrence:

- “Yahoo..they have not failed at anything.”
- “Microsoft has done nothing BUT fail the past five years…”
- “IBM needs to buy Microsoft, kill Vista and re-release and update XP, send Ballmer home, sell XBox to Electronic Arts, and put Office 2007 on the web (fully) before 2010 - or else it’s all over folks.”
- “I just think he’s overly caught up in the money-driven environment of his workplace.”

These are some of the funniest comments I’ve ever read on TC.

A week ago this guy claimed there was a 60% chance of this happening. Now we’re at 15%. Gotta love the these guys. Thank god I don’t listen to them other than for entertainment. They are as golden as any celebrity.

“How about another bet: chances of Yang remaining as CEO at Yahoo over the next year?”

Less than 0?

Late March - “There’s 110% chance that Microsoft will buy Yahoo.”
Early April - “It’s a no brainier, stockholders will win, Jerry will yield to them and OK the sale of Yahoo to Microsoft.”
Late April - “There’s a 50/50 chance Yahoo will farm out their advertising to Google, ending Microsoft’s bid.”
Yesterday - “Yahoo’s stock is going to be selling at 50 cents a share!”
Today - “There’s a 14.452342% chance Microsoft is playing a brilliant cat and mouse game.”

There’s 100% chance continuing to endless speculate as a smokescreen that you have no idea what you are talking about will fool 71.3% of the people 50% of the time.

How much is this Mark paid at Citi? I have a 50% percent of getting the Microsoft/Yahoo deal right as well. Surely I could get paid 50% of what Mark is getting, and I have a PhD as well.

More noise from the peanut gallery.

Hey Mike,

shows you what good these so called “analysts” are…

he got it wrong and I doubt he has any better insight than anyone else.

Deal ain’t happening, cause Yang does not want it to happen, as anyone with half a brain could have figured out.

case closed.

get another “analyst”, maybe one who can poke his head out of an excel spreadsheet and understands human behavior….

If I was Mark Mahaney right now, I’d ask Michael Arrington to stop “promoting” me.

“Compare Mahaney’s $26 price guess to the Fred Wilson’s informal crowdsourcing approach, which came in at $22. If the markets stay steady, the real price is nearly exactly the mid point between the two.”

Thanks for this brilliant insight. In the future, I’ll use this mid point rule to make my trades . I’ll call up Mark to get his price and then I’ll call up Fred Wilson to get a crowdsourced price and base my decisions on the mid point between the 2.

What could go wrong?

Please Michael stick to blogging.

Come on. 45%? 15%? I’m sorry, but you have to be a total yahoo (pun intended) to be guesstimating with such presumed accuracy. Give me an 80/20 or a 50/50 and I’ll bite. Anything beyond that and you are full of it - as we can clearly see. The worst of this story? He keeps on coming with these ludicrous percentage estimates and even continues to be backed by T/C. At least have the humility to acknowledge you were wrong and that you are going on very broad estimates based on your industry knowledge, which I am sure is as complete as anybody’s. Give me another percentage estimate and there’s a 99.8% chance I will never read T/C again or listen to anything Citi releases.

@Yotam 100% you will read T/C. Are you being a tad over dramatic?

I, for one, believe this guy.

@Todd, brilliant recap! 99.8597% in line with you

This is bollocks, why? The one flawed assumption is that the FCC and EU and other government agencies will let Yahoo! consolidate even more search share and power with Google. NOT LIKELY so the cash flow projections are fatally flawed.

It is also flawed because one of the key values in Yahoo! is it’s reach and advertising system. For short term gain Yahoo! generates some additional cash flow (assuming for one second, although unlikely they get approval) but in the medium to long term they erode their balance sheet and value by devaluing their own IP and system by handing it over to Google. They would also lose their most value employees, engineers by outsourcing in this area.

Want to see the merger go through.

Martin_Australia, I fully agree with you. Some thoughts on that:

(1) If Yahoo would quit monetization (and handing their own properties over for monetization to Google would essentially mean this), this would be bad for the Internet industry. It would mean a monopoly for Google on the crucial part of advertising.

(2) Sure, it would be good for Yahoo in the short term - it’s common knowledge that Google usually performs better on search monetization (”volvo x70 car dealer boston”) , because their entire system is based on search and based on the long tail. This does not mean, however, that Yahoo underperforms all the time. Yahoo’s system - from the old GoTo days - has been built around high-paying keywords with large volume, so they often even outperform Google considerable on those (”car dealer”). Depending on the application, the latter is often more relevant, and the Yahoo in my experience as a publisher has some clear advantages, too.

(3) The move would be bad for Yahoo in the long term. They’d be a publisher without advertising sales. Image TIME Magazine being 100% dependent on an print advertising sales agency which owns a monopoly on advertising sales? Unthinkable! But that’s exactly what would happen. Google would dictate them all terms, policies, usage areas, no matter on how good their contract is phrased.

(4) There is an inherent inventory / conflict of interest problem which Yahoo might not have considered… well, I’m sure they have, but it might have been pushed to the back of their mind in the heat of the moment. We can be pretty sure from publishers’ experiences, stockholder reports with their focus on TAC (traffic acquisition costs) and Google’s general strategic direction that one of Google’s agendas is to funnel more an more advertiser budgets and resources to their own sides opposed to third-party sites. Seeing it from Google’s perspective, it’s of course rational: why have an advertiser spend 1 Million $ on a partner site, where they make like 300-400 K $, and not on their own site, where they reap the entire 1 Million $. This inherent conflict of interest by the way has lead to loads of publishers fleeing DoubleClick after their acquisition by Google, at least that was the recent data from Europe.

So bottom line: Jerry, don’t give in to the temptation to doing it, even if some Citi banker thinks otherwise. You know better why you bought Overture in the first place!!!!

This is how come up all over the place in recent news, but this is the first time I heard them give a figure of 15%. 15%??? How do you even justify a number like that. Why isn’t it 20% or 10%? Google will take over Yahoo anyway.

The minute Google shows any more interest in Yahoo or vice versa, Microsoft will surely pull the anti-trust card that they’ve had pulled on them for Windows/Internet Explorer.

A deal with Microsoft is inevitable and the right thing for everyone:

Yahoo needs someone to teach them how to do PPC right.
Microsoft needs more Internet traffic.
Google can’t get any bigger or they will have a monopoly and legal problems.