Microsoft News Tracker

The deal that would not die is back for another episode and terrifying Microsoft shareholders everywhere. This time the story is that Microsoft Seeks Partners For a New Run at Yahoo:

Microsoft Corp., positioning itself for a new run for Yahoo Inc.’s search business, has approached other media companies in recent days about joining it in a deal that would effectively lead to Yahoo’s breakup, say people familiar with the discussions.

Microsoft has held discussions with Time Warner Inc. and News Corp., among others, say people involved in the talks. In the past, Microsoft has floated an arrangement under which it would acquire Yahoo’s search business and another partner, such as News Corp.’s MySpace or Time Warner’s AOL, would combine forces with what remained of Yahoo.

This effort does not seem to have been too successful as yet since Microsoft is said to have canceled a meeting with Yahoo Chairman Roy Bostock presumably because they had not yet found a buddy. The takeaway, however, is that Steve Ballmer apparently just won’t give up on a Yahoo search deal. When will the shareholders do themselves a favor and stage an intervention?

MSFTextrememakeover is shutting down his always interesting blog and by way of a farewell present provides a lengthy valedictory post about all the things that are wrong with Microsoft from a shareholder’s perspective - Eight Years of Wrongness:

For example, I bought my first MSFT shares back in the early 90’s. Like most holders that decade, I did very well. Then came this one, which has been an absolute disaster.

It’s sobering to realize that during Ballmer’s term as CEO, MSFT has underperformed almost all of its top tech peers (including AAPL, IBM, HPQ, SAP, INTC, CSCO, SYMC, NOK, ORCL, ADBE, RIMM, QCOM, Ebay, and AMZN), and badly lagged the major averages. We may even see our third plunge to test the 2000 lows during his watch. Unbelievable. There may be another major technology CEO with an equivalent or worse track record who is still in power, but a name doesn’t come readily to mind. Indeed, it’s instructive to note the four companies who didn’t make my list above: DELL, YHOO, Sony and Sun. In other words, four well-publicized flameouts/turnaround stories (depending on your perspective), all of which have new CEOs. Go figure.
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So it’s time for me to listen to the fat lady who has been singing for years now, and finally pull the plug. I can’t keep waiting another 11 years for MSFT’s leadership to deliver the returns that say AAPL’s have in just the past 12 months …

What follows is a lengthy dissection of Microsoft’s business which may be briefly summarized as Microsoft has become a bloated bureaucracy throwing money and people at "big bets" that aren’t paying off while mishandling the cash cows that are financing the party. I highly recommend you read his assessment and I agree with it, although I am somewhat more sanguine about the cash cows and would observe that Microsoft has had one sterling success in the last eight years - the server operating systems and server software which started to gain real momentum circa Windows 2000. Who knew there were high margin, low capital outlay profits in the software business?

Less cynically, Microsoft is suffering from the malaise that commonly afflicts successful companies. When they are young and hungry they conquer a market or several related ones which makes slower growth inevitable accompanied by a "middle age spread" of bloated headcounts and bureaucracy. However, management still yearns for the glory of the company’s lost youth and goes through a "midlife crisis" of mostly outlandish gyrations until a transition to maturity finally occurs, hopefully without lasting damage. Microsoft’s particular problem is that their core business is so incredibly profitable that management can indulge the midlife crisis on an unprecedented scale.

Yesterday, the “Microsoft acquires Facebook” rumors were back according to the Wall Street Journal, with the twist that the unidentified sources say that Microsoft is now only asking for 5% of the hot social networking fad site, but would pay a price that would give Facebook an over $10 billion dollar valuation.

Supposedly Facebook would dearly love the public valuation and could use a little walking around money, while Microsoft would love to demonstrate some trendy credentials and perhaps permanently lock in their Facebook advertising deal.

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Yesterday, Microsoft’s board declared a quarterly dividend of $0.11, up a penny from last quarter’s $0.10. It is payable December 13, 2007 to shareholders of record as of November 15. Presumably, it is a sop to shareholders concerned by the anemic stock price, but it is rather hard to figure why this is the best possible use of the cash.

MSN China is actually a joint venture between Microsoft and Shanghai Alliance Investment Ltd. (SAIL) a firm which if not exactly government owned, is “extremely well connected.” Now via Stephen Bink comes a report that SAIL wants out of the deal:

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