Shares of Microsoft closed today, July 27, 2009 at $23.11. I looked it up since other bloggers keep claiming that Microsoft is going to buy Yahoo. Now, before I say anything more, I do need to disclose that I am not an investment professional and I do not own stocks beyond 401K/403B/Pension savings. Nor do I work for any of the companies mentioned in this post. The same goes for my family.
Microsoft is in no position to buy Yahoo.
Microsoft last split in February 2003 at $24.96 which is well over a dollar less than where we are today. It would be a whole lot worse for Microsoft if Microsoft did not do a major buy back last fall. The fact is, Microsoft is selling Razorfish an advertising company to make up capital. Meanwhile advertising giant Google dominates advertising market share so don’t you dare tell me that people aren’t buying advertising in this market. Before you dismiss Google as some crazy start-up, keep in mind that their stocks continue to go up in today’s economy at the price of $444.80. Also consider that Google uses Linux, not Microsoft products. Microsoft, however, has been pouring money into online advertising for Internet Explorer 8 which is a product that people can’t even pay people to use. Meanwhile, American TV has a commercial four times an hour for Bing, Microsoft’s new search engine.
People say that Bing is picking up market share and weakening Yahoo. I looked up Yahoo’s stock prices that were $10.43 in February 2003 and at $17 today. That’s over $6 a share gain compared to Microsoft’s loss of over a buck. Also consider that during the whole month that Bing has been online, Yahoo’s stock has been on the rise. While Microsoft is busy selling a company, Yahoo bought Xoopit, an online photo tool. Now before you pa-shaw Yahoo, they do other stuff besides the directory based search engine. You should pay attention to Yahoo’s Zimbra which is an open source email and calendar server which does things like support mobile devices like Exchange only wishes it could. Oh yeah, Zimbra only runs on Linux or MacOSX and not Windows servers.
Yahoo is here to stay under the leadership of a strong businesswoman who does not look like she’s looking to exit.
So, to those who say “show me the money” when you doubt how open source friendly companies can compete, I invite you to look up some stocks using Microsoft Money Central. Other companies who are doing well as Microsoft struggles: Apple, Red Hat, IBM.