The Microsoft-Yahoo deal: How does it compare?

IDG News Service — Mon, 04 Feb 2008 13:42:34 -0800

Even by the bloated standards of high-tech mergers and acquisitions, the proposed Microsoft Corp.'s purchase of Yahoo Inc. appears to be the largest ever among technology firms. It is certainly Microsoft's largest. The company mostly buys smaller firms for less than a billion dollars to fill in gaps in its product lineup. But that may be changing. Last year, for instance, Microsoft bought Seattle online advertising firm aQuantive Inc. for US$6 billion, its largest ever until the long-rumored Yahoo deal was unveiled on Friday.

Here's how the proposed Microsoft-Yahoo deal compares to some other memorable high-tech acquisitions by the company's main competitors:

Deal: Microsoft offers to buy Yahoo

Why: Microsoft wants to buy into the search/online advertising biz. Yahoo is struggling. Their common foe: Google.

Price: $44.6 billion -- half cash, half stock -- a 62% premium over Yahoo's price a day earlier.

Hostile/friendly: Unsolicited, though the two firms have had discussions during the past 18 months, according to Microsoft CEO Steve Ballmer.

Key premerger stats:

Market cap: Microsoft: $303 billion; Yahoo: $25.6 billion

Head count: Microsoft: 78,565; Yahoo: $14,300 (minus 1,000 in layoffs announced earlier this week)

Revenues: Microsoft: $58 billion; Yahoo: $7 billion

Net profit: Microsoft: $16.9 billion; Yahoo: $660 million

Deal to complete when: Microsoft is targeting the end of this year, if Yahoo agrees and no regulators call foul.

Other major Microsoft acquisitions:

1999: Visio Corp. (business planning), for $1.4 billion

2001: Great Plains Software Inc. (accounting and CRM), for $1.45 billion

2002: Navision Software (ERP), for $1.45 billion

2007: aQuantive Inc. (Internet advertising), for $6 billion

2008: Fast Search & Transfer ASA (enterprise search), for $1.3 billion

Deal: Hewlett-Packard Co. buys Compaq Computer Corp. (2001-2002)

Why: To beat back Dell in PCs and get within striking distance of the overall IT leader, IBM.

Price: $25 billion in stock, though the value fell to $19 billion by the time the deal was completed nearly a year later.

Hostile/friendly: Friendly, but the move quickly turned messy as parts of HP's own board -- led by the Hewlett family -- opposed the merger, which was led by CEO Carly Fiorina.

Key premerger stats:

Revenues: HP: $47 billion; Compaq: $40 billion

Head count (combined): About 162,000

Number of products (combined): 85,000

HP and Compaq's PC businesses, No. 2 and No. 3, respectively, behind Dell at the time, were both losing money.

Postmerger:

Rocky for a while. HP laid off more than 15,000 employees, or 10% of its workforce. Fiorina was forced out, and new CEO Mark Hurd was hired to take her place. HP later revealed that it had been spying on board members and the media. Four years later, HP has reached its fiscal goals. It reported $104 billion in revenue last year and $9.6 billion in net income. In 2006, HP regained the lead from Dell in PCs and took the overall IT spot from IBM. And it is hiring again: The company now has 156,000 employees, up from 145,000 immediately after the merger.

Other major HP acquisitions:

1997: VeriFone, in a $1.2 billion stock swap (sold in 2001)

2006: Mercury Interactive Corp., for $4.5 billion

2007: Opsware Inc., for $1.6 billion

Deal: Oracle Corp. buys PeopleSoft Inc. (2003-2005)

Why: Oracle wanted to build a one-stop shop. It coveted PeopleSoft's strong HR and CRM software. Oracle CEO Larry Ellison also seemed to have it in for his former lieutenant and PeopleSoft CEO, Craig Conway.

Price: Initial offer in 2003 of $6.3 billion in cash rose to $10.3 billion after two years of wrangling.

Hostile/friendly: Very hostile under Conway, as PeopleSoft tried to elude its unwanted suitor. Acceptance came after Conway was let go and founder Dave Duffield rejoined as CEO.

Key premerger stats:

Revenues: Oracle: $9.5 billion (2003); PeopleSoft: $2.3 billion (2004)

Head count: Oracle: about 41,000 employees; PeopleSoft: about 12,000

Postmerger:

Oracle laid off 9% of the combined company's 55,000 employees, though it appeased customers by keeping key PeopleSoft developers and support staff. Oracle is also integrating the PeopleSoft apps with its own into a new product line called Fusion. Oracle is on target to hit $20 billion in revenue this year, more than double what it had in 2003. Much of that is coming from acquisitions. Including PeopleSoft, Oracle has done more than 20 such deals in the past three years. Earnings continue to rise, and its market cap of $105 billion is 70% higher than it was five years ago.

Other major Oracle acquisitions:

2005: Siebel Systems Inc., for $5.9 billion

2007: Hyperion Solutions Inc., for $3.3 billion

2007: BEA Systems Inc., for $8.5 billion

Deal: IBM buys Lotus Development Corp. (1995)

Why: Losing against Windows with OS/2, IBM wanted to open another front against Microsoft with strong desktop software products. Lotus had Notes, then the dominant "groupware" product, and its SmartSuite office productivity suite.

Price: $3.5 billion

Hostile/friendly: Lotus initially looked for a "white knight" to save it from IBM's clutches but quickly succumbed after IBM re-raised its offer.

Key premerger stats:

Notes was used by 1.5 million employees at 5,500 companies at the time, according to The New York Times.

Postmerger:

Notes remains popular, though Microsoft Outlook and Exchange surpassed it nearly five years ago. SmartSuite was a nonstarter. However, IBM is taking another stab at unseating Microsoft in Office and e-mail. Notes 8 is now much slicker-looking, while IBM has introduced an office suite based around OpenOffice technology that draws upon the old Lotus Symphony brand name.

Other major IBM acquisitions:

2002: PricewaterhouseCoopers, for $3.5 billion

2003: Rational Software Corp., for $2.1 billion

2007: Cognos Inc., for $5 billion

Sources: Computerworld, IDG News Service, Microsoft.com, Wikipedia, Morningstar.com, HP.com, SEC.gov, Bizjournals.com, The New York Times, News.com

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The Microsoft-Yahoo deal: How does it compare?