Came across a nice rundown of MSFT’s revenues across units:
In 2006, Yahoo! had net income of $751M on revenues of $6.4B, for a margin of 11% (in 2005 it boasted margins of 36% though) with a P/E of 60. Google, meanwhile, did $3B in net income on $10.6B in revenues, for a margin of 29%, with a P/E of 46.
So say on average, a top tier US portal boasts margins of 25% and a P/E of 50 (quite rich, I know), that implies that MSN.com / Live Search
- generates profits of 0.25 x $2.3B = $575M
- is worth $28.75B
At today’s close, Yahoo! was worth $43B and Google a stunning $144B.
At a valuation of $28.75B, MSN.com / Live Search would be worth 67% of Yahoo! and 20% of Google.
Of course, Google owns 5% of AOL.com… and while many have talked about AOL.com being bought by Yahoo!, and many are calling for MSFT to outright buy Yahoo!, I am thinking, why not spin off MSN.com / Live Search into Yahoo!
Yahoo! has a stronger brand than MSN.com / Live Search (and which one is it, anyway: MSN.com or Live.com?), and frankly, Google’s 50% market share in search implies that it cannot buy a search player without raising the ire of the antitrust cops…
But MSN and Yahoo! combined outside of MSFT, now that could work. Of course, there is nothing stopping MSFT in being a major shareholder of Yahoo! If Yahoo! is worth $42B and MSN.com / Live Search would be worth $28.75B, and assume the new entity would be simply worth the sum, which is $71.75B, then technically MSFT could/would own 40% of Yahoo! which is, well, not as crazy as MSFT owning all of Yahoo!
In fact, while 2007 has seen tides turn and the Web gods smile down upon Yahoo! while Google has tripped up with lawsuits and what not, MSN.com / Live Search is not as fortunate as Yahoo!, meaning that it might have an incentive to divest directly in Web ventures to invest indirectly via a spin-off of MSN.com / Live Search into Yahoo!, who has the Web at its DNA core.
The combined entity would be powerful in many ways: its share of searches (according to comScore) would be Yahoo!’s 28.1% + MSFT’s 10.5% = 38.6%, compared to Google’s 48.1%. More importantly, the combined entity would be far and away the largest media property online, eclipsing everyone else by a mile and reach practically every single Web user in the world.
The likelihood of this is close to zero, and if we could dole out negative percentages, we would here. MSFT and Bill Gates were slow to recognize the Web’s importance. They were then slow to embrace search. With $44B in revenues and 70,000 employees, there is a much higher likelihood for them to double up on search and the Web… but that being said, owning 40% of the world’s largest and arguably greatest media empire would not necessarily be a poor alternative either, and it just might unleash MSN.com/Live’s value.
More strategically, it would also put Google on the defensive, something that MSFT might welcome more than you and I can imagine.
Disclosure: I own shares in YHOO!
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WatchMojo NewsletterTech Crunch is a good website. Sometimes the information is useful, sometimes it’s interesting, sometimes I think Michael Arrington and his posse are on crack. This just might be one such time.
I am not sure if we are in a bubble, I doubt it. I see pockets of bubbledom, last year we saw it with Video file sharing platforms, that bubble went away with the YouTube sale to Google. Web 2.0, whatever it was, also burst once people found out that this was no shortcut to quick riches and most by-products of Web 2.0 were not, in itself, companies, but applications or features that would not really be able to generate revenues.
All that is nice and dandy, but sometimes I see things that are simply insane.
Case in point: last night, Nick Gonzales wrote about a “startup” that is seemingly a stupid product with no business model. Dubbed, The Efficient Crank Call Tool, this product would allow to:
You type in a phone number and tell it how many times you would like the service to call it. The service will then call the phone that number of times.
the point of the post, Mr. Gonzales said:
But there’s a point here. People complain that we don’t cover enough startups here on TechCrunch, and that more (or all) that submit profiles deserved to be covered. Most aren’t anywhere near as idiotic as this service, but applying a filter does have a purpose. We see stuff like this every day, and just this once we thought we’d share one of them with you.
The first comment was on the 26th, at 9:33pm, echoing the juvenile nature of the product.
The 13th comment questions the stupidity of said product, arguing, if there is merit in it?
The 18th comment questions whether TC is running out of ideas.
The 25th comment introduces the inventor of this product.
The 43rd comment argues “maybe there is a business model” here.
Eventually, the 51st comment shows an interest in investing in said product by the morning of the 27th, at 7:49am.
That, my friends, is freaking crazy.
Via Robert Young, on NewTeeVee. This reminds me of something I read on John Battelle’s blog, a comment posted by one Lars Mouritzen, who is not a random commentor, but rather, was head of new media strategy at BBC and currently a KPMG as Head of Media within the firm’s Information, Communication and Entertainment (ICE).
Will the Web’s future be more about video than text?
I had no idea this was still ongoing, but EMI was the last label standing in its litigation against Bertelsmann, who had provided $85M in loan backings to Napster. I fully respect copyright owners’ rights and all, but this excerpt from a NYT article is very telling:
The deal between EMI and Bertelsmann represents a resolution of a bitter chapter for the music industry, which has long sought redress for the havoc unleashed by Napster in 1999 and later by its more sophisticated successors. Since swapping music files online turned into a mass phenomenon, sales of recorded music have plunged. While the industry has won a series of legal victories, it has been unable to reverse the slide, which it attributes largely to continuing piracy.
Suing Bertelsmann had appeared to represent the industry’s best chance to recover significant damages.
It’s telling, because the labels still blame Napster, instead of their reluctance to come up with a compelling, easy to use and successful digital distribution system in an era of digital media.
PLAY
