Posted by: Rob Hof on July 18
With its annual meeting looming in just two weeks, Yahoo is ratcheting up its defense against Carl Icahn's proxy fight with an energy critics wish they'd seen for the past few years of Yahoo's gradual decline. The fight for control of Yahoo always looked like a close call amid all the shareholder anger directed at Yahoo's board and cofounder and CEO Jerry Yang as they rejected one Microsoft overture after another. But as I wrote last week, momentum has turned Yahoo's way. Now, amazingly, it looks like Yahoo could actually win this thing.
Today, Yahoo got at least one high-profile backer, one who may be enough to turn the tide: Bill Miller, chairman and chief investment officer of Legg Mason Capital Management, Yahoo's second-largest shareholder. Miller released a statement today in support of Yahoo's current board. It reads in part:
We have met with representatives of the current Board and management, including founder Jerry Yang, several times. We believe the current Board acted with care and diligence when evaluating Microsoft's offers. We believe the Board is independent and focused on value creation for long-term shareholders.
In general, we believe it is appropriate for large shareholders to have representation on corporate boards if they so desire. Mr. Icahn's slate includes people experienced in technology, advertising, capital markets and governance. We would prefer that the company and Mr. Icahn reach a mutual agreement on the composition of the Board and end this disruptive proxy contest.
Mr. Icahn has said that Steve Ballmer has made it clear to Mr. Icahn that Microsoft cannot negotiate a transaction with the current Board of Yahoo! but would negotiate with a new Board led by Mr. Icahn. While boards are there to protect shareholder interests, shareholders own the company. If Microsoft wants to acquire Yahoo!, it can make the terms and conditions of its offer public. If Yahoo! shareholders support it, I am confident the Board of Yahoo! will accept it.
Yahoo is also turning up the heat on Icahn, in particular, with a series of statements and borderline nasty letters to shareholders and to its own employees. From the last one:
Carl Icahn bought his stock two months ago for an estimated average cost of less than $25 per share. He is well-known as a corporate agitator with a short-term approach to his investments. His short-term approach gives Mr. Icahn a strong incentive to strike any deal with Microsoft that enables him to recover his investment and get back his money quickly, even a deal that does not provide full and fair value to you. Is that in the interests of all stockholders? Clearly, it is not.
And the letter doesn't let Microsoft off the hook either:
This "odd couple" collaboration – between two parties with keenly different agendas – is indeed perplexing. Why does Mr. Icahn believe he can count on Microsoft to complete a transaction? Certainly Microsoft is a well-respected and successful company and we have been clear that we are fully prepared to do a deal with them. But Microsoft’s flip flops and inconsistencies over the past five months are so stupefying that one can only conclude that Microsoft was never fully committed to acquiring Yahoo! either because:
* Microsoft can’t decide what is and isn’t strategically important to its online business; or
* Microsoft is more interested in destabilizing a key competitor so that it can either enhance its competitive position or buy our highly valuable search business-—and the enormously desirable intellectual property associated with it--at a bargain basement price.
Not least, Yahoo is taking its campaign right to its own hugely trafficked home page with "a message from Yahoo" button where people can click through to more information on the proxy fight--though Henry Blodget at Silicon Alley Insider isn't so sure this is a shareholder-friendly use of Yahoo's prime real estate.
Still, Yahoo is a long way from home-free. Next Tuesday, it will report second-quarter earnings that, even if Yahoo weren't already grappling with tough competitors like Google and the departure of key executives, would be challenging thanks to the poor economy. Even Google missed its second-quarter, though apparently not because of the economy, but ValueClick, Bankrate, and Looksmart have all issued warnings. And they depend on the same display ads that make up most of Yahoo's revenues.
What's more, next Wednesday, ISS, the proxy advisory service owned by RiskMetrics, is expected to issue its advice to shareholders on the board vote. Few people expect ISS to recommend Icahn's slate in its entirety, but there's no guarantee it will recommend all of Yahoo's current board. And its opinion carries a lot of weight with institutional shareholders.
All this could prove to be noise. All the parties no doubt would prefer to get a deal done to letting the press have a field day at the Aug. 1 annual meeting. As I wrote earlier this week, there's a lot more dealmaking to come.
Posted by: Arik Hesseldahl on July 17
All those wondering how much longer Hector Ruiz would remain CEO of Advanced Micro Devices got their answer on July 17, when the struggling chipmaker replaced him with COO Dirk Meyer. The change up was long overdue.
Under Ruiz, AMD mounted a valiant attack on Intel's dominance of the computer chip industry, logging impressive market share gains earlier this decade, with its Opteron platform for servers, and its Athlon chips for PCs before that. But the groundwork for was laid long before Ruiz joined AMD. Both chips are versions of AMD's Sledgehammer architecture that was first demonstrated in 1999, before Ruiz joined the company.
More importantly, the era didn't last. Intel responded with a series of technical advances of its own and recaptured much of its lost market share. AMD then suffered a nasty delay on one of its server chips allowing Intel to press its case even further. AMD's main response was to cut prices on its existing lines of chips in order to stay competitive.
It might have worked. Cutting prices might have bought AMD and Ruiz some time, had it not occurred during the same period that AMD was still suffering from the digestion pains brought on by the $5.4 billion acquisition of the Canadian graphics chipmaker ATI. While there were arguably some good technical reasons for the combination, financially it has been a disaster. Not only did AMD take on a huge load of debt to get the deal done -- long term debt was $1.3 billion at the end of fiscal 2005 and is more than $5 billion now -- but within a year of announcing the deal it had to write down the value of ATI's assets. Its now worth a little more than half what it paid. Saying 2006 was a lousy time to buy ATI is something of an understatement.
Continue reading "Ruiz Steps Down At AMD"
Posted by: Rob Hof on July 17
My quick take on Google's second-quarter earnings (full release after the jump and updates from conference call below): It's a miss, though not a huge one.
My full story is here, and below are notes from the conference call:
CEO Eric Schmidt says he's "obviously very pleased with what we believe are very good results" in a normally slow quarter and in a tough economic environment.
Outgoing CFO George Reyes says paid clicks were up 19%, a sharp slowdown, which he continued to attribute to quality improvements--that is, placing fewer ads on sites with little useful content. Capital spending was at $698 million, certainly not a small number and spending that Reyes implies will continue apace.
Economist Hal Varian acknowledges weakness in a lot of sectors, but says query growth is positive in every sector, even those like autos and real estate you'd expect to be down. Revenue growth is also up from a year ago in all sectors except real estate, which he said was down only slightly. He didn't say how much query or revenue growth was up.
Now, to some of the analysts' questions:
Brian Pitts of BofA asks about ad coverage. Jonathan Rosenberg, senior vice-president of product management, says he sees little change in Google's efforts to improve ad quality by showing fewer but more relevant ads on pages. But cofounder and president of products Sergey Brin says "perhaps we were a little overly aggressive in decreasing coverage in this quarter," so that could change a bit. That certainly could help results next quarter and beyond, and may please investors always looking for scraps of visibility on Google's outlook.
Justin Post at Merrill Lynch asks about the impact of the economy. Schmidt: "We continue to believe that we're positioned very very well ... because of a flight to quality and to performance." Varian adds: "We have a little bit of the Wal-Mart effect: people are watching their dollars and therefore shopping more."
He also asks about YouTube. Schmidt: "We're enormously happy with YouTube," but repeats that they haven't seen the perfect ad format for YouTube.
Mark Mahaney at Citi asks about costs being up a bit more than expected. Reyes says it's largely legal costs, which Schmidt says will be "bursty" depending on when and how many lawsuits get filed. In other words, it was relatively onetime and might explain part of the earnings miss this quarter--thanks, Viacom.
Ben Schachter of UBS asks about headcount, with an increase of 448 in the quarter down quite a bit. Schmidt says with the company at such a large size now, 19,604 people, "we don't need massive new (numbers of) people." That also may reassure some investors, eventually.
Jeetil Patel of Deutsche Bank asks about ad coverage. Brin basically repeats what he said before with bigger words like "asymptote."
Questions about wireless, but I didn't hear much new there.
And that's it for the call.
Here's the full release, after the jump:
Continue reading "A Rare Miss for Google (GOOG) on Second-Quarter Earnings"
Posted by: Rob Hof on July 17
I'll have a quick take on Google's second quarter earnings as soon as they're released shortly after 1 p.m. Pacific time. I'll add key comments from the conference call and post an early draft of a full story a couple of hours later. Several blogs, such as Between the Lines and Silicon Alley Insider, will be provided details too.
For now, some background: Analysts expect 42% growth in net revenue, before payments to marketing partners, to $3.87 billion, and $4.74 in earnings. That would be up from earnings excluding special items of $3.56 a share on sales of $2.7 billion a year ago.
Google’s results will be closely watched for any signals of slowing growth in online ad sales, which so far has largely escaped the economic doldrums. Google executives have said online advertising could be affected by the poor economy, but so far they have not reported any impact. In the first quarter, the company exceeded expectations despite analyst worries based on market research reports that appeared to indicate fewer people clicking on search ads.
Some firms are starting to see, or at least anticipate, some slowdown in online advertising. Earlier in the day, ValueClick reduced its sales and earnings estimates, saying “the macroeconomic environment negatively impacted revenue in the quarter, primarily in the U.S. comparison shopping and U.S. display advertising businesses.” ValueClick, whose business is based on generating leads to potential customers, has had challenges in recent quarters, so it’s unclear whether its troubles indicate an industrywide problem. Yahoo will report its second-quarter earnings on July 22.
However, Google may be in something of a class by itself, thanks to its dominance of the most lucrative part of the online advertising business--one whose measurability may appeal to cash-strapped advertisers more than brand-oriented display ads. Its share of search queries rose to 69% last month, at the expense of Yahoo and Microsoft, according to market researcher Hitwise. Even more important, Google's share of search ad dollars in the second quarter rose to more than 77%, according to search marketing firm Efficient Frontier. Google’s growth has slowed as sales have rocketed from $3.2 billion three years ago to $16.6 billion last year, but topline growth is still the envy of almost any company its size.
Posted by: Olga Kharif on July 17
This year, the number of hotspots globally will rise 40%, according to a July 17 forecast released by consultancy ABI Research, which notes that "the greatest growth and the largest number of hotspots continue to be found in Europe. While the UK has long led in European Wi-Fi hotspots, there is also marked growth in France, Germany, and Russia."
Which begs the question: Why isn't Wi-Fi in the U.S. growing as fast? Apple's Wi-Fi-enabled iPhone was first introduced in America. Carriers like T-Mobile USA have been pushing home Wi-Fi phone services like Hotspot @ Home and @ Home. Starbucks recently began offering Wi-Fi service in its cafes for free. And the U.S. lags behind Europe in wireless data speeds of traditional wireless networks -- which should be a major impetus for Americans to use Wi-Fi. So, why aren't we using it as much as the Britons?
