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DealBook: Potential Buyers Renew Their Interest in Yahoo

September 16, 2011 by Leave a Comment

Yahoo's headquarters in Sunnyvale, Calif.Kimberly White/Bloomberg NewsYahoo’s headquarters in Sunnyvale, Calif.

With potential buyers circling above, Yahoo, the once-mighty online empire, is preparing to sell.

The technology giant, which is weighing a sale of all or parts of its business, has attracted the attention of several buyout shops and strategic investors, including the private equity firm Silver Lake, which has already approached Yahoo about a potential bid, two people close to Yahoo said.

Silver Lake, which is working with the venture firm Andreessen Horowitz, has been quietly studying a possible bid for the last six months, one person said. Other potential bidders for Yahoo or its assets include Microsoft and the Alibaba Group.

The renewed interest in Yahoo comes as the company faces a critical juncture.

The sprawling Internet media company, which rose to prominence in the late 1990s for its popular portal, has fallen behind in recent years. While rivals like Google and upstarts like Facebook have boomed in the new Web, Yahoo has struggled to keep pace with the shifting digital landscape.

Last week, in a moment that starkly portrayed its troubles, the board dismissed its chief executive, Carol A. Bartz, by phone. Ms. Bartz, well known in Silicon Valley for her brash attitude and comfort with expletives, joined Yahoo less than three years earlier.

Yahoo’s board discussed Silver Lake’s approach during its meeting on Wednesday and hired Allen Company as its investment bank for a continuing review of Yahoo’s business. The board also talked about Yahoo’s Asian assets, which include a 40 percent stake in the Alibaba Group, a Chinese e-commerce company, and a stake of about 35 percent in Yahoo Japan. In addition to Allen Company, Yahoo is working with UBS, which already advises the company on its options for its stake in Yahoo Japan.

The Asian investments complicate any buyout of Yahoo.

The board has yet to decide whether to keep those assets, sell them or spin them off, the individuals said. Many analysts consider those holdings the crown jewels of its portfolio, collectively worth more than the sum of the rest of its operations.

The relationship between Yahoo and Jack Ma, Alibaba’s chief executive, is strained over a number of issues, most recently the fate of the online payment service AliPay. Last year, Alibaba spun off AliPay into a separate company that Mr. Ma controlled. Yahoo learned of the transfer only after the fact and complained that it had been done by Mr. Ma without the approval of Alibaba’s board.

Alibaba and Yahoo reached a deal in July that settled their disagreement. But the relationship between Yahoo and Mr. Ma, who has long said that he wanted to buy back Yahoo’s stake in his company, remains strained.

Yahoo, Microsoft, Silver Lake Partners and Andreessen Horowitz declined to comment. Individuals close to the matter spoke on the condition they not be identified because the talks were confidential.

For Yahoo, which rejected a bid from Microsoft in 2008, the crowd of suitors is a familiar one. According to two people with knowledge of the situation, Providence Partners and Peter Chernin, the former chief operating officer of the News Corporation, also are studying a possible bid. This year, Mr. Chernin approached Yahoo about a possible deal, according to one person. But he was rebuffed. Meanwhile, Silver Lake, which recently profited from the sale of Skype to Microsoft, has long been said to be a potential buyer.

Any deal, analysts say, will require substantial financial backing. Yahoo’s market capitalization currently stands at $18.8 billion. Yahoo, according to two people, is considering hiring a third bank which could help provide financing. Although analysts have described the company as a “deteriorating asset,” it is still one of the Web’s largest properties.

“Yahoo is still very important to the ecosystem,” said Scott Raney, a partner with Redpoint Ventures. “It has significant scale and it has some of the more interesting advertising technology out there,” he added.

Yahoo is facing intense pressure from investors to do something. Daniel Loeb, the founder of Third Point, a hedge fund that owns a 5 percent stake in Yahoo, called for the removal of Roy Bostock, Yahoo’s chairman, and of other board members.

AllThingsD earlier reported the list of potential buyers for Yahoo.

Michael J. de la Merced contributed reporting.

Article source: http://feeds.nytimes.com/click.phdo?i=9a64279c5c77be8b73855671babcbba8

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On Wall St., a Big Split on Outlook

August 22, 2011 by Leave a Comment

Typically bullish in the best of times, this group has barely budged on its expectations for earnings in the second half of 2011, even as the economists and strategists at the big brokerage firms have steadily ratcheted down their forecasts for overall economic growth.

That disconnect could prove painful for investors. On Friday, shares of Hewlett-Packard were punished after the technology giant reported results below analysts’ projections and warned them to bring down future numbers. Earlier in the week, similar shortfalls caused shares of Dell and Urban Outfitters to sink.

The 17 percent drop in the Standard Poor’s 500-stock index since late July suggests investors already suspect earnings growth may not be as robust as forecast when the summer began. But if more analysts start cutting their estimates in the coming weeks, that could provide yet another incentive for traders to sell.

Investors are clearly anxious. Stocks fell more than 4 percent last week as the wild swings on Wall Street continued, including a 419-point drop for the Dow Jones industrial average on Thursday.

“Absolutely, the numbers look too high to us,” said Doug Cliggott, a United States equity strategist at Credit Suisse. “In the last two or three weeks, we’ve had a slew of data showing our growth could be slowing a lot more than expected.”

All this means that September could be a make-or-break month for the stock market. “A lot of Wall Street folks come back after Labor Day and sharpen their pencils,” said Adam Parker, United States equity strategist at Morgan Stanley.

When they do return, they will have plenty of numbers to crunch that suggest a further slowdown is possible. On Friday, the Labor Department reported that unemployment rose in 28 states and the District of Columbia in July, while it fell in only nine states. A day earlier, the Federal Reserve Bank of Philadelphia announced that manufacturing activity in the mid-Atlantic region shrank sharply in August.

Traders will be closely watching a range of figures due out this week for more signs of a so-called double-dip recession. On Tuesday, the government is to report on sales of new homes for July, followed by a report on durable goods orders on Wednesday. Data on initial jobless claims and consumer sentiment in August will follow later in the week.

In spite of the lackluster economic numbers in recent weeks, analysts’ expectations for earnings growth of the typical company in the Standard Poor’s 500-stock index have edged downward only slightly. The current consensus for the third quarter calls for 15.6 percent earnings growth, not far from the 17 percent analysts forecast on July 1, according to data compiled by Thomson Reuters.

In the fourth quarter, analysts expect growth of 17 percent, just 0.6 of a percentage point below where the projections were at the beginning of July.

By contrast, economists at the big brokerage houses have been busy slashing their projections for overall growth, with JPMorgan Chase weighing in on Friday while Morgan Stanley and Goldman Sachs trimmed their numbers the day before. JPMorgan now expects fourth-quarter economic growth to be 1 percent, down from an earlier projection of 2.5 percent. Morgan Stanley warned that the United States and Europe were “dangerously close to recession.”

While they may work for the same bank, analysts and economists don’t necessarily see eye to eye.

In the argot of Wall Street, broad economic growth projections are called top-down forecasts because they incorporate a wide range of macroeconomic factors, like manufacturing output and the unemployment rate.

That contrasts with the bottom-up estimates arrived at by tallying the earnings projections of analysts who follow individual companies. The two groups usually work independently — and can project different results.

Article source: http://feeds.nytimes.com/click.phdo?i=d1f42225c0bfc049596503fe1a482d34

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Google Unveils App for Paying With Phone

May 27, 2011 by Leave a Comment

On Thursday, the technology giant introduced Google Wallet, a mobile application that will allow consumers to wave their cellphones at a retailer’s terminal to make a payment instead of using a credit card. The app, for the Android operating system, will also enable users to redeem special coupons and earn loyalty points.

Starting this summer, the wallet will be available on the Nexus S 4G phone on Sprint and able to hold certain MasterCards issued by Citibank. It will also hold a virtual Google Prepaid MasterCard.

The mobile wallet will work at any of the 124,000 merchants that accept MasterCard’s PayPass terminals, which take contactless payments, and more than 300,000 merchants outside the United States. The wallet is powered by a technology called near-field communications, which is incorporated into a chip in mobile phones and sends a message to the merchants’ terminals.

“Eventually, you will be able to put everything in your wallet,” Stephanie Tilenius, vice president for commerce at Google, said at a news conference.

That grand vision will take a while to come to fruition. Various players have been working on mobile wallets for years, but they have not gained traction because the companies have not been able to agree on how they would be paid or who would control the wallets. Cellular carriers, banks, credit card issuers, payment networks and technology companies all have a stake in this battle.

With its wallet, Google plans to make money by offering consumers promotions as they shop. For instance, it plans to introduce “Google Offers” — advertising deals from local and online businesses that can be found online or sent through the phone. Like Groupon, Google will collect a fee from participating retailers every time a person redeems a coupon. Citibank will collect the same fees as it would in a traditional credit card transaction.

Google Wallet will need some time to become fully functional nationwide. While Google has worked with more than 15 retailers, like American Eagle Outfitters, Bloomingdale’s, the Container Store and Jamba Juice, they all need to upgrade their payment terminals. When they do, consumers will also be able to store and redeem deals with the wallet. Merchants in New York and San Francisco are expected to be ready this summer.

Once the retailers’ technology is in place, consumers will be able to wave their phone at the checkout counter and, in one swoop, discounts will be applied, loyalty points will be awarded and payments made. Someday, Google said, when consumers enter the store, their phones may serve up a list of items they recently bought, and offer them related discounts.

The wallet app itself will require a PIN, as will each transaction. The payment credentials will be encrypted and stored on a chip inside the phone.

Google emphasized that the wallet would be open to all businesses and invited other banks, credit card issuers, payment networks, mobile carriers and merchants to work with it.

“I expect that other payment networks and other banks will join this effort, though in some cases it will be a hedge strategy they employ along with their own mobile payment initiatives,” said Charles S. Golvin, an analyst with Forrester Research. “Since these payments utilize the same underlying business model as cards today, there is not significant disruption risk for these players.”

Google is also working with First Data, which processes payments and will ensure the security of the transaction.

If the phone was stolen, the credit cards inside could be remotely disabled. Consumers would have the same “zero liability” for unauthorized transactions made with their phones as they would with plastic cards.

Separately, PayPal filed a suit on Thursday against Google and two of its former executives who are now at Google, including Ms. Tilenius. The suit claims that they misappropriated trade secrets from PayPal’s mobile-payment business. A Google spokesman declined to comment because he said they have not yet received a copy of the complaint.

Eventually, Google said, its wallet may be able to hold much more, including car keys and airline boarding passes. But access to such items will still require a fully charged phone.

If the phone battery dies, even Ms. Tilenius of Google conceded, “I think you need to use your plastic at that point.”

Article source: http://feeds.nytimes.com/click.phdo?i=56a7aef1e355329e698fb4ccb39786be

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DealBook: Microsoft in Talks to Acquire Skype for $8.5 Billion

May 10, 2011 by Leave a Comment

12:20 a.m. | Updated

Microsoft is in advanced talks to acquire Skype, which revolutionized telephone calls over the Internet, for $8.5 billion, including the assumption of debt, according to people involved in the negotiations.

A deal is expected to be announced Tuesday morning, these people said, although they cautioned that the talks could still fall apart. A spokesman for Skype declined to comment, and calls to Microsoft were not returned.

The acquisition would be Microsoft’s largest ever and it is the software giant’s effort to gain a foothold in the world of voice and video communications. Microsoft would be able leverage Skype’s more than 600 million registered users into using its other products. For example, it could be connected to Microsoft’s Xbox 360 and Kinect systems,  and integrated into the company’s flagship product, Office, as a way for business users to better collaborate.

It could also help Bing, its search engine, which competes with Google. It may also help bolster Microsoft’s fledging mobile telephone offering, which lags far behind Apple’s iOS and Google’s Android operating systems. The deal would end months of speculation in Silicon Valley about Skype’s future. The company had been planning an initial public offering but delayed those plans last year, leading to persistent rumors that it would be sold to another technology giant like Facebook, Google or Cisco Systems.

News of the deal and Microsoft’s interest in Skype was first reported by The Wall Street Journal online and the technology site GigaOM.

Skype has some 663 million registered users, the company said in a recent filing. Although most of its services are free, Skype makes the bulk of its profits from a small fraction of its users who pay for long distance calls to telephone numbers. Despite its popularity, the service has struggled to maintain profitability; in 2010, Skype made $859.8 million in revenue but recorded a net loss of $7 million, according to its filing.

Skype burst onto the scene in 2003 and has long been seen as a challenger to the telephone companies because it can route phone calls — and video calls — over the Internet free or for a nominal fee. Most telephone carriers have come to accept Skype, but still see it as a potential threat. It is unclear how the wireless carriers that support handsets with Microsoft’s operating system would view the deal and how tightly Microsoft would seek to integrate Skype into mobile.

Microsoft, analysts say, is making a move to block Google from gaining greater ground in Internet communications.

“This is part of the strategic fight between Microsoft and Google,” said Rob Enderle, an independent technology analyst.

Facebook, Mr. Enderle said, has a large market value, but not the cash to do deals as Microsoft does. “Microsoft is backing Facebook’s play, and to some degree entering this fight on Facebook’s side of this strategic confrontation with Google,” he said.

Microsoft, analysts say, has often been an astute acquirer of start-ups and smaller companies, picking off technical teams that are then folded into products likes Windows, Office and Internet Explorer. But during Steve Ballmer’s tenure as chief executive, beginning in 2000, the company has also made far larger, riskier bids, mostly unsuccessful.

In 2004, Microsoft entered into talks to buy the big business software company SAP, for about $50 billion, according to testimony that came out in a court case.

In 2007, Microsoft acquired aQuantive, an online advertising company, for roughly $6 billion, a sizable premium, and some suggested it overpaid.

Nearly three years ago, the company made a surprise $48 billion offer for Yahoo. Talks then broke off, and Microsoft withdrew its bid, but later reached a partnership to take over Yahoo’s search business.

If a deal for Skype is reached, it would be the second time a technology giant has acquired the company. EBay bought Skype in 2005 for $2.6 billion with hopes of tightly integrating the service as a sales tool.

But the deal never lived up to its promise and eBay took a $1.4 billion write-down on its investment. Skype was sold in 2007 to a consortium of investors led by Silver Lake Partners, Index Ventures, Andreessen Horowitz and the Canada Pension Plan Investment Board. Marc Andreessen of Andreessen Horowitz, who co-founded Netscape Communications, was seen as a pivotal matchmaker for Skype, at one point trying to put it together with Facebook, another company for which he is on the board, according to people involved in the discussions.

JPMorgan Chase and Goldman Sachs are advising Skype.

Evelyn M. Rusli and Verne Kopytoff contributed reporting.

Article source: http://dealbook.nytimes.com/2011/05/09/microsoft-in-talks-to-acquire-skype-for-8-5-billion/?partner=rss&emc=rss

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