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Warren Buffett and Dan Gilbert Unite in Bid to Acquire Yahoo
- yalogin 10y agoDoesn't Buffet famously stay away from Tech? What changed? He is buying Yahoo and has invested in Apple.
- arvinjoar 10y agocompare market cap to assets
- TrainedMonkey 10y agoValuations dropped enough for it to be a sensible buy. Buffet stated before that he does not understand why tech valuations are so high based on the fundamentals.
- Someone1234 10y agoAnd he's quite right. Apple might be the exception because of their extensive cash reserves. But if you look at Facebook or Twitter, it is hard to tell why they're selling for that amount. I myself avoid index funds which over-invest in tech because I believe we're in a bubble.
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- encoderer 10y agoHow you could compare Facebook to Twitter is beyond me.
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- Someone1234 10y agoI didn't compare them, I grouped them together.
- encoderer 10y agoSo you would group them, but not compare them to each other?
- ep103 10y agoeh, the valuation on facebook I understand though. Yes, it is extremely high, but the premise is that with that much social data, that much user stickiness, and that level of talent, and you are one of very few players that look like they could seriously give google a run for their money in the advertising business. Read enough, and you start wondering if Verizon / Google / Facebook won't outright own digital advertising industry in enough time. Read some more fanciful stuff, and you start wondering if they have enough data to actually change user behavior and dictate spending streams preemptively. I could be wrong on all of this though, I'm just a dev, not an industry expert : )
- swyman 10y agoIt sounds like he's just providing financing for a Gilbert-led group of investors. I don't know enough about private equity or Warren Buffett to know if that's still significantly out of character for him
- hristov 10y agoProbably valuations dropped low enough that yahoo can be valued as a classic media company instead of a tech company. What generally scares Buffet from tech is that the price of tech stocks is greatly inflated to reflect expectations of future growth. Buffet is very skeptical of inflated expectations of future growth. But I do not think there is any great expectations of future growth in yahoo. In fact many analysts say that if you strip out the valuable asian assets, the value implied by the market for Yahoo's US business is about zero or even negative. So the answer is that Yahoo is not really a tech stock anymore, but the traditional definition of that term. At least it is not priced like a tech stock.
- nerfhammer 10y ago> the value implied by the market for Yahoo's US business is about zero or even negative. Probably precisely why Buffet is interested in it.
- ori_b 10y ago> In fact many analysts say that if you strip out the valuable asian assets, the value implied by the market for Yahoo's US business is about zero or even negative. If the value implied by the stock price is zero or negative, then even buying the company and selling off the office furniture nets you a tidy profit. More realistically, it's very likely that if a company has negative value -- ie, that someone would pay you to take it off their hands -- then it is severely undervalued.
- avar 10y agoI don't think that's true. Even badly performing companies like Yahoo! aren't only priced as a sum of their physical assets, but also intangible ones, e.g. the skills of their employees, their market position etc.
- daemin 10y agoSomeone actually did a calculation of this just recently, like about a month ago max. Adding up the Alibaba stake, the Yahoo Japan stake, the office and associated infrastructure, that summing those up totalled far less than the current share price. Somewhere around -8 billion IIRC.
- verganileonardo 10y agoHe is not buying equity in Yahoo, he is lending money to the actual buyer and will receive interest on that lending. (Which is much more secure)
- rkrzr 10y agoActually it sounds as if he would be buying convertible bonds according to the article. This means he will have the opportunity to convert his bonds into equity at some point in the future (at some share price in the future) if he chooses to exercise this right. Otherwise he will indeed just be collecting interest.
- verganileonardo 10y agoYes, that is exactly the case! :)
- sytelus 10y agoSo he is assuming Gilbert & company would be able to turn Yahoo around, churn out some cash and pay the interest? That would be very long shot given the history.
- Grazester 10y agoThat was back in the day before he even bought IBM shares
- zekevermillion 10y agoWhere else can you find an outlet to spend over a $billion at once where the underlying assets are more valuable than the security that represents them? Kind of a unique and Buffet-like opportunity.
- oh_sigh 10y agoBuffett(BRK) is financing the deal. That's different from investing
- Animats 10y agoApple has a P/E ratio of 9.82. (2015 actual). That's what a mature, profitable company looks like. AAPL isn't overvalued. That's the sort of thing Buffet buys. IBM is at 9.90. Compare P/E (last full year numbers): Google: 31.12 Facebook: 80.41 Salesforce: 948.63 Twitter: (loss) LinkedIn (loss)
- geogra4 10y agoWonder if he'll bring a chunk of Yahoo to Detroit?
- Kinnard 10y agoI can't imagine he has any other plan. I'm a Detroiter. Too bad Yahoo isn't really a tech company: http://www.paulgraham.com/yahoo.html http://www.paulgraham.com/yahoo.html
- mathattack 10y agoWhat's the Detroit connection with Warren and Yahoo? I must have missed that in all the articles.
- maxerickson 10y agoGilbert. https://en.wikipedia.org/wiki/Dan_Gilbert_%28businessman%29#Detroit_initiatives https://en.wikipedia.org/wiki/Dan_Gilbert_%28businessman%29#...
- mathattack 10y agoAhhh - interesting. If he can convince the top U of M grads to stay in Detroit rather than heading for the costs, he may be able to pull something off. Are there many success stories of Silicon Valley companies leaving the Valley?
- billylindeman 10y agoIt's with Dan Gilbert and Detroit. He basically owns the city. My friends and I like to refer to the new downtown as Dantroit.
- thearn4 10y agoDetroit or Cleveland most likely. That's been his M.O. with his incubator, Bizdom.
- 1024core 10y agoAs a shareholder, I welcome the competition. :) Also interestingly: Bain Capital is in the running. In the past, Yahoo has used Bain Capital as consultants to reorg, restructure, etc. It would almost seem like a conflict of interest, since they are acutely familiar with the innards of Yahoo. Edit: as /u/mcmoose75 mentions below, "Bain Capital" and "Bain Consulting" (the one I was thinking of) are two separate entities.
- mcmoose75 10y agoYou may be confusing Bain & Company (the consulting firm, a competitor to McKinsey) and Bain Capital. Bain Capital was started by some former Bain consultants, and is obviously similarly named, but is a totally independent organization.
- 1024core 10y agoYou are probably right. Sorry for the confusion.
- chrisan 10y agoThis is the emotional Dan Gilbert who enjoys Comic Sans http://deadspin.com/the-cavaliers-finally-took-down-dan-gilberts-insane-com-1601145301 http://deadspin.com/the-cavaliers-finally-took-down-dan-gilb...
- eumoria 10y agoYahoo and Comic Sans. Together, in relevance, stuck in the 20th century.
- georgehotelling 10y agoI'm an ex-Quicken Loans employee, and my best guess is that Dan enjoys Comic Sans so much because of the reaction it gets. The billionaire equivalent of trolling. To that end, while working on the web team we added a Konami code to the QL website that would change the entire site to Comic Sans. I just checked and sadly that Easter Egg got lost in a redesign.
- JoshTriplett 10y agoIt's not obvious what the acquiring group mentioned in this article would do with Yahoo after they've bought it, to make it worth the price. They'd have the 5th most visited domain name on the Internet, but as Yahoo has demonstrated, visits don't automatically turn into money. (Twitter has a similar problem, and sits at #8, but they have a social aspect that Yahoo doesn't.) Unless Alibaba comes with the purchase at a discount, or someone wants to acqui-hire whatever talent hasn't already fled, an acquisition doesn't seem even remotely sensible. A few quick checks suggest that Yahoo's searches-per-day traffic is still decent, at 12.4% of the market (2.2 billion searches/month); perhaps redirecting that to some competing search engine might be worth it for a cheap enough price.
- sb057 10y agoIt's funny you mention Alibaba. I did a little digging, and it turns out that Softbank (who owns ~35% of Alibaba to Yahoo's ~24%) has a 35% stake in Yahoo Japan. Very interesting stuff.
- TazeTSchnitzel 10y agoYahoo! Japan is a separate company from Yahoo, Inc. It was formed as a joint venture between Yahoo, Inc. and SoftBank, thus both of them holding a stake.
- gcb0 10y agoand what reason it had to jump on alibaba?
- TazeTSchnitzel 10y agoYahoo had a smart CEO who realised Alibaba's potential, that's all.
- gcb0 10y agowas asking about softbank
- ChuckMcM 10y agoI find these things amusing "according to people who aren't authorized to speak publicly" except that they are talking to a reporter so that's kinda public. But really what they want to do is let potential other players know that "oh yeah, its real, we're bringing it and we're gone sell this thing, if you want a piece of this you better wake up and call us or your going to lose out." kind of vibe which attempts to incent other buyers to please make a bid and bring the price up. According to the Credite Suisse banker who helped with a transaction I participated in the ideal number of buyers is 3, and it helps if at least two of them both know each other and are competitive (think Benioff and Ellison for example). I can see Microsoft's goal, add it the Bing group and give Bing the portal as well as it already has all the search traffic. Not so clearly on Berkshire though, breaking it up works if you can get it at the right price. I could also see IAC wanting to play, they could use a portal property to link all their front ends together.
- yuhong 10y agoI really wish the restrictions can be reduced or removed so board of directors (like @pmarca) can tweet more on the companies, including on things like this.
- taejo 10y ago> I find these things amusing "according to people who aren't authorized to speak publicly" except that they are talking to a reporter so that's kinda public. But unauthorized. That's the point.
- jeroen 10y ago> "according to people who aren't authorized to speak publicly" except that they are talking to a reporter so that's kinda public. They are speaking publicly, but they "aren't authorised" to do so.
- howlingfantods 10y agoBuffett is no fool. Berkshire is providing the financing to Dan Gilbert's group and will receive guaranteed interest as well as an option to convert to equity. I'm sure that financing is jammed packed with warrants and covenants. Buffett has basically parlayed the prestige of his name into sweetheart deals with provisions that no other company could get (eg. his investment in Goldman Sachs).
- samstave 10y agoBut who cares about yahoo? (Serious question) yahoo should just die. Please tell me why it shouldn't
- pbreit 10y agoBecause it's a global top 5 web property with a billion+ monthly users.
- ergothus 10y agoAs a consumer, it might make sense to say this. From a business perspective (he says having no business experience or expertise), Yahoo is a collection of assets: Code, people, branding, community. They aren't in first place, and they aren't profitable at the moment, but I think the case that they have zero or negative value is a bit simplistic. Put it another way: Would you rather throw a pile of money at trying to build a collection of code, talent, business contracts, and users from scratch, or would you rather buy an EXISTING collection, on the cheap, and work instead to flip it into a profitable business? Both are risky ventures, but everything I've seen says it's harder to build from scratch than it is to keep existing users. Perhaps your answer is that you'd prefer to build it from scratch, but do you see why - if the answer takes some thought to determine - that someone else might come to a different conclusion? Heck, even if you want to completely toss the business model - even if you want to toss everything they've done and what they are trying to do - I'd imagine the servers, in-house expertise, and collected code and utilities, not to mention any purchased or licensed software, would make Yahoo worth considering as an acquisition.
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- jonbarker 10y agoI've been following Buffett since the 1990s and his reputation for shunning tech seems to be based on his wise choice not to play in tech in the late 1990s. This seems to be based on relatively simple valuation techniques as well as asking the important question "Do I understand the business?". Of course he missed some winners as a result of this but overall it helped his results. His two tech moves so far, IBM and Apple, don't violate that approach at all so it makes sense.
- smegel 10y agoThis is Buffett, so he must be thinking about this in terms of business, not tech. Maybe they have calculated they could break Yahoo up and sell the pieces for more than they bought as a whole? Otherwise I'm out of ideas.
- tosseraccount 10y agocloset indexing.
- gtk40 10y agoLooking forward to a redesign of Yahoo! to match Berkshire Hathaway's website: http://www.berkshirehathaway.com/ http://www.berkshirehathaway.com/
- emidln 10y agoI love that they have an ad for Geico on their site. Edit: Apparently GEICO is wholly owned by BH
- hkmurakami 10y agoYup it's Buffet's favorite company in his portfolio.
- Gargoyle 10y agoI've always loved CAA's website (the most powerful agency in Hollywood). http://www.caa.com/ http://www.caa.com/ At a certain level, you don't really need a website.
- rhgraysonii 10y agoHonestly, it is elegant, simple, and serves the purpose they need. I have worked with a few agents and talent representatives and this is the ideal they seem to shoot for even if they are not in such a tier of excellency.
- adventured 10y agoThe new version is already in beta: https://web.archive.org/web/19961017235908/http://www2.yahoo.com/ https://web.archive.org/web/19961017235908/http://www2.yahoo...
- minikomi 10y ago6.3K .. snappy.
- auggierose 10y agoClicking on the Berkshirewear link there gives you this: http://www.berkshirewear.com/ http://www.berkshirewear.com/ Kinda funny.
- strictnein 10y agoRead this first as "Warren Buffet and Dilbert Unite in Bid to Acquire Yahoo". I think I prefer that headline.
- icc97 10y agoBuffett is a fan of the “cigar butts with one last puff left” [1]. It seems like he's applying a similar philosophy here. [1]: http://basehitinvesting.com/warren-buffett-letter-on-walter-schloss/ http://basehitinvesting.com/warren-buffett-letter-on-walter-...
- gopi 10y agoSo if it happens, does Dan Gilbert slowly move Yahoo workforce to Detroit to save money?
- kiproping 10y agoIs the death of Yahoo due to poor leadership or did it just die a natural death like myspace or AOL
- astrodust 10y agoThere was nothing natural about the death of either of those. Both were accelerated by an indifference to their platform. Facebook could have gone the same way but they've largely stayed vigilant about being relevant to people.
- Coneylake 10y agoI kind of want you to give me some examples of both of your points, please.
- astrodust 10y agoMySpace completely failed to stay with the times post-acquisition, they kept focusing on catering to big-name bands rather than the huge base of individuals. Over time people grew tired of MySpace being indifferent to them and moved on. Today the same type of crowd has made Snapchat a huge success. AOL remained fixated on catering to their existing customer base and trying to grow high-margin dial-up revenues. They squandered their capital even harder than Yahoo did, as there's not a single AOL branded anything that's a best-of-breed. Everything about the company is second rate. Consider this: They bought the internet's darling company, Netscape, and could not make a nickel off of it or even keep the brand alive in any useful sense despite investing heavily in a series of increasingly bizarre reboots. Facebook, by comparison, will not hesitate to incorporate features from other competing products if they think they're going to drive the platform forward and has made a number of strategic purchases like Instagram and Oculus to help cement their relevance. I'm not even a fan of Facebook, but I admire their tenacity and their incredible ability to survive in an industry littered with the wreckage of previously huge social empires.
- tgb29 10y agoWhen I consider Yahoo's value, I think of email, fantasy football, news, and tumblr. All four seem to be struggling when compared to their alternatives, but each of the products appear to have great potential value. It's hard to determine the quality of Mayer's work as CEO; some decisions were good, some look bad. I'm not confident she is a product person, and this is based on her management of Tumblr and the lack of development in email functionality and UI. I could be wrong. I do go to Yahoo news everyday and it's not a bad service. It's fun to think about what the world would be today if Yahoo acquired Facebook LOL.
- MicroBerto 10y agoWere I to take on Yahoo, I'd turn it into a content powerhouse, with supporting tools. Yahoo! Finance should have the best articles -- very technical yet explanatory -- all supported by their stock tools. A billion ways to monetize that. I would use Yahoo! Sports to seriously go after ESPN, which is turning into a turdpile of garbage that's worse than TMZ. I'd literally troll them and get some extremely technical content as well as the fun stuff. Monetize with fantasy, tickets, live stream, schwag, etc. Rinse and repeat with other news sectors. I'd find about a dozen niches and build out some aggregators with trending stuff - basically DrudgeReport style aggregators for each niche - awesome headlines and all. Eventually, steer some content towards consumer facing products, and build out a shopping engine for the ones that are consumer-related. Would this be the next Facebook or Google? No. But it'd be profitable as hell and with the right no-holds-barred content team in each niche, it'd once again become intertwined with American culture. It would "never" die, and it'd be a true fighter for the first amendment. I don't deal with apps so I'd hire one of you guys to be my #2 for that side of the game. Buffett and Gilbert you know who to call when you want this company to become relevant again.
- adventured 10y agoIt would cost billions of dollars to even attempt to go after ESPN. The primary value ESPN offers today is ownership of broadcast rights. Yahoo can't afford to outbid Disney on those rights and shareholders would never support risking that much capital on such. What you're describing would never make money. Aggregator sites are among the worst things you could ever attempt if your goal is to make money, which is why so many of them fail and or produce mediocre business outcomes. Drudge is a unique outcome that is nearly impossible to repeat - which is why nobody has been able to replicate it after all of these years. Its popularity occurred solely due to the Clinton impeachment scandal and two decades of brand / trust building when it comes to editing. Having a juggernaut of articles and content in business / finance is worth very little. You could combine TheStreet.com, Marketwatch.com, Quartz, Seeking Alpha, Fool.com and Business Insider all under one umbrella and it would be worth less than a billion dollars and barely make any money. It would be a complete waste of time and wouldn't move the needle on Yahoo's business.
- ppierald 10y agoSue Decker, ex-Yahoo CFO & President sits on the Board of Directors for Birkshire Hathaway. I'm sure she has plenty of insight to the value of the company, and the complexities of its business.
- shirro 10y agoI don't know what is going on here but my bet is it has more to do with rich people doing tricky stuff with money than a vote of confidence in Yahoo, its products or potential to make money If I was saddled with a dinosaur like Yahoo I would split it up and try and get some cash then rename what was left and I still think you would just be delaying the inevitable. The Yahoo name has about as much value as Netscape or Novell. It pretty much says outdated, failed technology company that has been overtaken by the competition.
- anonql 10y agoI'm weary of this. As a Detroiter I'm not a fan of Gilbert. Though the prospect of bringing a large tech co to Detroit is nice, Gilbert and his people are very unpleasant to work with. They pay lip service to the importance of technology but generally don't respect tech people, or know how a real tech company operates. Not to mention their questionable morals (politically manipulating the State of Ohio so they could have a casino monopoly, instant mortgages, reverse mortgages, etc.). Firstly, the Bizdom incubator was a mess. Very poorly run. Not a single successful business came out of it. No actual founders taught students. Just ex-QL people or trusted friends; the only thing in common was that none of them had ever started or ran a startup. Most of the startups that gained any traction did so by selling to Gilbert's other companies rather than proving that they have a real market - lots of incest going on. On top of that, some entrepreneurs got straight-up screwed. At a minimum, by highly abusive investment terms (such as Bizdom owning 67% of the company and having the ability to modify operating agreements at will) - and to top it off, multiple founders in their system have had their ideas ripped off by Gilbert's people. That's on top of their ridiculous real estate ventures. Such as offering startups hip, beautiful office space in Downtown Detroit - in exchange for a percentage of their company (I hear it's over 10%, with very few people biting). The startups that went through their investment funnels were "heavily encouraged" to get space there. My guess is that if he gets Yahoo, he'll open up an office in Detroit, try to QL-ify it (i.e. make it a sales company that is a fairly close parody of Glengarry Glen Ross), it will flounder for a few years, and either get sold again or just die. I really wish Detroit had a better advocate.
- gcb0 10y agoevery time I missclick a New York Times link in my no-JavaScript mobile browser the site manages to redirect me back to the referrer url I was at. it's really uncanny. I click a link on HN, and after a page load, I'm back at hacker news. except this one link. what should I think of that? why that single link is different than ever other nytime.com links?
- arjun1296 10y agoWhat I was interested in Yahoo was the YQL. After it closed the chatroom services I almost quit using yahoo.
- Communitivity 10y agoIdea which I find interesting, but is probably not on target, is BH leveraging their investments in Yahoo and Apple to have Apple take over Yahoo. The sense of style which Apple cultivates applied to digital content curation, combined with a personal digital assistant tweaked for librarian reference desk responses (Viv-ianne the Librarian).
- edpichler 10y agoI remember to read a lot of times that Warren does not invest in technology, because it's too risk and he only invest in what he understands. So, now it seems he learned.
- some_guy1234 10y agoyahoo -> $0. good luck Buffet